6560-50-P ENVIRONMENTAL PR OTECTION AGENCY 40 CFR Parts 51 and 52 [EPA-HQ-OAR-2003-0062; FRL- ] RIN 2060-AN86 Final Rule for Implementation of th e New Source Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM 2.5 ) AGENCY : Environmental Protection Agency (EPA). ACTION : Final rule. SUMMARY : The EPA is finalizing regulations to implement the New Source Review (NSR) program for fine particulate matter (that is, particles with an aerodynamic diameter less than or equal to a nominal 2.5 micrometers, generally referred to as
“PM 2.5 ”). The NSR program was created by the Cl ean Air Act (Act or CAA) to ensure that stationary sources of ai r pollution are constructed or m odified in a manner that is consistent with air quality goals in the area. The Clean Air Fine Particle Implemen tation Rule, which was proposed in the Federal Register on November 1, 2005, included require ments and guidance for State and local air pollution agencies to follow in deve loping State implementation plans (SIPs) and also the NSR provisions. The final implementa tion rule that was prom ulgated on April 25, 2007, included all the SIPs related provisions. In this rulemaking, EPA is finalizing the NSR provisions of the Novemb er 1, 2005 proposed rule including the major source threshold, significant emissi ons rate, and offset ratios for PM 2.5 , interpollutant trading for offsets and applicability of NSR to PM 2.5 precursors.

1DATES : This final rule is effective on [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]

. ADDRESSES : The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2003-0062. All documents in the docket are listed on the www.regulations.gov web site. Although listed in the index, some information may not be publicly available, e.g., CBI or other info rmation whose disclosure is restricted by statute. Certain other material, such as copyr ighted material, is not placed on the Internet and will be publicly availabl e only in hard copy form. Publicly available docket materials are available eith er electronically through www.regulations.gov or in hard copy at the Air Docket, EPA/DC, EPA We st, Room 3334, 1301 Constitution Avenue, Northwest, Washington, DC. The Public R eading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the Air Docket is (202) 566-1742. FOR FURTHER INFORMATION CONTACT : Mr. Raghavendra (Raj) Rao, Air Quality Policy Division, Office of Air Qual ity Planning and Standards (C504-03), U.S. Environmental Protection Agency, Res earch Triangle Park, North Carolina 27711, telephone number: (919) 541-5344, facsimile number: (919) 541-5509, e-mail address: rao.raj@epa.gov ; or Mr. Dan deRoeck, at the same address, telephone 919-541-5593, or e-mail at deroeck.dan@epa.gov. SUPPLEMENTARY INFORMATION : I. General Information
A. Does this action apply to me ?
2Entities affected by this rule include sour ces in all industry groups. The majority of sources potentially affected are ex pected to be in the following groups:

Industry group Electric services ......................................

. Petroleum refining ..................................

. Industrial inorganic chemicals ................

. Industrial organic chemicals ...................

. Miscellaneous chemical products ...........

. Natural gas liquids ..................................

. Natural gas transport...............................

. Pulp and paper mills................................

. Paper mills ..............................................

. Automobile manufacturing .....................

.

Pharmaceuticals ......................................

. NAICS a 221111, 221112, 221113, 221119, 221121, 221122 32411 325181, 32512, 325131, 325182, 211112, 325998, 331311, 325188 32511, 325132, 325192, 325188, 325193, 32512, 325199 32552, 32592, 32591, 325182, 32551 211112 48621, 22121 32211, 322121, 322122, 32213 322121, 322122 336111, 336112, 336712, 336211, 336992, 336322, 336312, 33633, 33634, 33635, 336399, 336212, 336213 325411, 325412, 325413, 325414

a North American Industr y Classification System. Entities affected by this rule also include States, local review ing authorities, and Indian country with new and modi fied major stationary sources.
B. Where can I get a copy of this document and other related information? In addition to being available in the docket, an electronic copy of this final rule will also be available on the World Wi de Web. Following signature by the EPA Administrator, a copy of this final rule will be posted in the re gulations and standards section of our NSR home page located at http://www.epa.gov/nsr

. C. How is this preamble organized? 3The information presented in this preamble is organized as follows:
I. General Information A. Does this action apply to me? B. Where can I get a copy of this document and other related information? C. How is this preamble organized? II. Purpose III. Background A. New Source Review (NSR) Program B. Fine Particulate Matter and the NAAQS for PM 2.5 C. Implementation of NSR for PM 2.5 IV. Overview of This Final Action V. Rationale for Final Actions A. Applicability of NSR to Precursors of PM 2.5 in the Ambient Air 1. What is EPA’s legal aut hority to regulate precursors? 2. What is EPA’s approach for addressing precursors? 3. Final Action on SO 2 4. Final Action on NO X 5. Final Action on VOC 6. Final Action on Ammonia B. Major Stationary Source Threshold for PM 2.5 C. Significant Emissions Rate fo r Direct Emissions of PM 2.5 D. Significant Emissions Rates for PM 2.5 Precursors E. Condensable PM Emissions F. Prevention of Significant Deterior ation (PSD) Program Requirements 1. How must BACT be implemented for PM 2.5 ? 2. How does EPA plan to address PM 2.5 Increments, Significant Impact Levels (SILs), and Significant Monitoring Concentrations (SMCs)? 3. What is the ambient air quality analysis requirement for PM 2.5 ? 4. How must the PSD preconstructi on monitoring requirement be implemented for PM 2.5 ? G. Nonattainment New Source Revi ew (NA NSR) Requirements 1. What is the required offset ratio for direct PM 2.5 emissions? 2. Which precursors are subjec t to the offset requirement? 3. What is the required offset ratio for PM 2.5 precursors? 4. Is interpollutant trading allowable to comply with offset requirements? H. How will the transition to the PM 2.5 PSD requirements occur? 1. Background 2. Transition for “Delegated States” 3. Transition for “SIP-Approved States” I. How will the transition to the PM 2.5 NA NSR requirements occur? 1. Background 2. Transition 3. Implementation of NSR Under the “Emissions Offset Interpretative
4Ruling” (40 CFR part 51, a ppendix S) with Revisions J. Does major NSR apply to PM 2.5 precursors during the SIP development period? K. Are there any Tribal concerns? L. What are the requirement s for minor NSR for PM 2.5 ? M. Rural Transport Areas VI. Statutory and Executive Order Reviews A. Executive Order 12866: Regulat ory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132 - Federalism F. Executive Order 13175 - Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045 - Protection of Children from Environmental Health and Safety Risks H. Executive Order 13211 - Actions That Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898 - Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations K. Congressional Review Act L. Petitions for Judicial Review M. Determination Under Section 307(d) VII. Statutory Authority
II. Purpose The purpose of this rulemaking is to fi nalize the major NSR program provisions for PM 2.5 . This final rule supplements the final implementation rule for PM 2.5 (excluding the NSR provisions) that we 1 promulgated on April 25, 2007 at 72 FR 20586. This final action on the bulk of the major NSR program for PM 2.5 along with our proposed rule on increments, SILs, and SMC, when final, will represent the final elements necessary to implement a PM 2.5 PSD program. When both rules ar e promulgated and in effect, the
PM 2.5 PSD program will no longer use a PM 10 program as a surrogate, as has been the

1 In this proposal, the terms “we,” “us,” and “our” refer to the EPA and the terms “you” and “your” refer to the ow ners or operators of stationa ry sources of air pollution. 5practice under our existing guidance.
III. Background
A. New Source Review (NSR) Program The existing regulations require both major and minor NSR programs to address any pollutant for which there is a National Ambient Air Quality Standard (NAAQS) and precursors to the formation of such pollutant when identified for regulation by the Administrator. This final rule amends th e NSR regulations to establish the minimum elements for State, local, and Tribal ag ency programs implementing NSR for the PM 2.5 NAAQS. This preamble also explains what interim provisions would apply with respect
to PM 2.5 during the State Implementation Plan (SIP) development period. The NSR program is a preconstruction permitting program that applies when a source is constructed or modified. The NS R program is composed of three different
programs:

• Prevention of Significant Deterioration (PSD);

• Nonattainment NSR (NA NSR); and

• Minor NSR. We often refer to the PSD and NA NSR progr ams together as the major NSR program because these programs regulate only major sources. 2 The PSD program applies when a major sour ce that is located in an area that is designated as attainment or unclassifiable fo r any criteria pollutant is constructed or

2 The Act uses the terms “major emitting facility” to refer to sources subject to the PSD program, and “major stati onary source” to refer to sources subject to NA NSR. See CAA sections 165, 169, 172(c)(5), and 302(j). Fo r ease of reference, we use the term “major source” to refer to both terms.
6undergoes a major modification. 3, 4 The NA NSR program applies when a major source that is located in an area that is designated as nonattainment for any criteria pollutant is constructed or undergoes a ma jor modification. The minor NSR program addresses both major and minor sources that undertake constr uction or modification activities that do not qualify as major, and it applie s regardless of the designation of the area in which a source is located. The national regulations that apply to each of these programs are located in the Code of Federal Regulations (CFR) as shown in the following table:

Program Applicable regulations PSD ................................ 40 CFR 52.21, 40 CFR 51.166, 40 CFR 51.165(b) NA NSR ......................... 40 CFR 52.24, 40 CFR 51.165, 40 CFR part 51, appendix S Minor NSR..................... 40 CFR 51.160-164 The PSD requirements include but are not limited to:

• Installation of Best Availabl e Control Technology (BACT);

• Air quality monitoring and modeling anal yses to ensure that a project’s emissions will not cause or contribut e to a violation of any NAAQS or maximum allowable pollutant increase (PSD increment);

• Notification of Federal Land Mana ger of nearby Class I areas; and

• Public comment on the permit. Nonattainment NSR requirements include but are not limited to:

• Installation of Lowest Ac hievable Emission Rate (L AER) control technology;

3 The term “criteria pollutant” means a po llutant for which we have set a NAAQS.

4 In addition, the PSD program applies to most noncriteria regulated pollutants.
7• Offsetting new emissions with cr editable emissions reductions;

• Certification that all major sources owned and operated in the State by the same owner are in compliance with al l applicable requirements under the Act;

• An alternative siting analysis demonstra ting that the benefits of the proposed source significantly outweigh the environm ental and social costs imposed as a result of its location, constr uction, or modification; and

• Public comment on the permit. Minor NSR programs must meet the statutory requirements in section 110(a)(2)(C) of the Act, which requires “... regulation of the modification and construction of any stationary source ... as n ecessary to assure that national ambient air quality standards are achieved.”
B. Fine Particulate Matter and the NAAQS for PM 2.5 Fine particles in the atmosphere are made up of a complex mixture of components. Common constituents include sulfate (SO 4 ); nitrate (NO 3 ); ammonium; elemental carbon; a great variety of or ganic compounds; and inorganic material (including metals, dust, sea salt, and other trace elements) generally referred to as “crustal” material, although it may contain ma terial from other sources. Airborne particulate matter (PM) with a nominal aerodynamic diameter of 2.5 micrometers or less (a micrometer is one-millionth of a meter, and 2.5 micrometers is less than one-seventh the average width of a human hair) are consid ered to be “fine particles,” and are also known as PM 2.5 . “Primary” particles are emitted direc tly into the air as a solid or liquid particle (e.g., elemental carbon from diesel engines or fire activities, or condensable organic particles from gasoline engines). “S econdary” particles (e.g., sulfate and nitrate) 8form in the atmosphere as a result of various chemical reactions. The health effects associ ated with exposure to PM 2.5 are significant. Epidemiological studies have shown a signi ficant correlation between elevated PM 2.5 levels and premature mortality. Other important effects associated with PM 2.5 exposure include aggravation of respir atory and cardiovascular diseas e (as indicated by increased hospital admissions, emergency room visits, abse nces from school or work, and restricted activity days), lung disease, decreased l ung function, asthma attacks, and certain cardiovascular problems. Individu als particularly sensitive to PM 2.5 exposure include older adults, people with heart a nd lung disease, and children. On July 18, 1997, we revised the NAAQS fo r PM to add new standards for fine particles, using PM 2.5 as the indicator. We established health-based (primary) annual and 24-hour standards for PM 2.5 (62 FR 38652). We set an annual standard at a level of 15 micrograms per cubic meter (μg/m 3 ) and a 24-hour standard at a level of 65 μg/m 3 . At the time we established the primary standard s in 1997, we also esta blished welfare-based (secondary) standards id entical to the primary standards. The secondary standards are designed to protect against majo r environmental effects of PM 2.5 such as visibility impairment, soiling, and materials damage. On October 17, 2006, we revised the primary and secondary NAAQS for PM 2.5 and PM 10 . In that rulemaking, we reduced the 24-hour NAAQS for PM 2.5 to 35 μg/m 3 and retained the existing annual PM 2.5 NAAQS of 15 μg/m 3 . In addition, we retained
PM 10 as the indicator for coarse PM, retained the existing PM 10 24-hour NAAQS of 150 μg/m 3 , and revoked the annual PM 10 NAAQS (which had previously been set at 50 μg/m 3 ). See 71 FR 61236. 9C. Implementation of NSR for PM 2.5 After we promulgated the NAAQS for PM 2.5 in 1997, we issued a guidance document entitled “Interim Implementation fo r the New Source Review Requirements for
PM 2.5 ” (John S. Seitz, EPA, October 23, 1997). 5 As noted in that guidance, section 165 of the Act suggests that PSD requirements become effective for a new NAAQS upon the effective date of the NAAQS. Section 165( a)(1) of the Act provides that no new or modified major source may be constructed w ithout a PSD permit that meets all of the section 165(a) requirements with respect to the regulated pollutant. Moreover, section 165(a)(3) provides that the emissions from any such source may not cause or contribute to a violation of any NAAQS. Also, secti on 165(a)(4) requires BACT for each pollutant subject to PSD regulation. The 1997 guidance st ated that sources would be allowed to use implementation of a PM 10 program as a surrogate for meeting PM 2.5 NSR requirements until certain difficulties were resolv ed, primarily the lack of necessary tools to calculate the emissions of PM 2.5 and related precursors, the lack of adequate modeling techniques to project ambient impacts, and the lack of PM 2.5 monitoring sites. On April 5, 2005, we issued a guidance document entitled “Implementation of New Source Review Requirements in PM-2.5 Nonattainment Areas” (Stephen D. Page, EPA). 6 This memorandum provides guidance on the implementation of the nonattainment major NSR provisions in PM 2.5 nonattainment areas in the interim period between the effective date of the PM 2.5 NAAQS designations (April 5, 2005) and the

5 Available in the docket for this rulemaking, ID No. EPA-HQ-OAR-2003-0062, and at http:/www.epa.gov/region07/pr ograms/artd/air/nsr/nsrmemos/pm25.pdf

. 6 Available in the docket for this rulemaking, ID. No. EPA-HQ-OAR-2003-0062, and at http:/www.epa.gov/nsr/documents/nsrmemo.pdf. 10promulgation date of the final NSR regulations reflected in this acti on. Besides affirming the continuation of the Seitz guidance memo in PM 2.5 attainment areas, the April 5, 2005 memo recommends that until we promulgate the PM 2.5 major NSR regulations, States should use a PM 10 nonattainment major NSR program as a surrogate to address the requirements of nonattainment major NSR for PM 2.5 . On November 1, 2005, we proposed a rule to implement the 1997 PM 2.5 NAAQS, including proposed revisions to the NSR program (70 FR 65 984). As discussed above, this action finalizes the portion of that propos al related to NSR. The other portions of that proposal, concerning attainment dates, SIP submittals, reasonable further progress (RFP) requirements, etc., were fi nalized on April 25, 2007 (72 FR 20586). On September 21, 2007, we proposed additi onal elements for the PSD program for PM 2.5 including PM 2.5 “increments,” significant impact levels (SILs), and significant monitoring concentrations (SMCs). (72 FR 54112) Increments are the maximum allowable increases over baseline concentratio ns that can be permitted to occur when a major source is constructed or modified. This is one mechanism by which the PSD program prevents significant deterioration in air quality. A SIL defines the level of ambient air impact that is considered a “sig nificant contribution” to air quality. If the modeled maximum ambient impacts of a new source or modification are below the SILs, the source: (1) is presumed not to cause or contribute significantly to a PSD increment or NAAQS violation, and (2) is not required to perform the multiple-source, cumulative impacts assessments that are otherwise require d under PSD. An SMC defines the level of modeled ambient air impact below which the reviewing authority may exempt a new or modified source from conducti ng the preconstruction monitoring that may otherwise be
11required under PSD. The reviewing author ity may also exempt the source from preconstruction monitoring if the existing mon itored ambient concentration is less than the SMC. This final action on the bulk of the major NSR program for PM 2.5 along with our proposed rule on increments, SILs, and SM C, when final, will represent the final elements necessary to implement a PM 2.5 PSD program. When both rules are promulgated and in effect, the PM 2.5 PSD program will no longer use a PM 10 program as a surrogate, as has been the prac tice under our existing guidance.
IV. Overview of This Final Action The table below summarizes the main elements of the existing NSR program that this action addresses for PM 2.5 as a regulated NSR pollutant. The table indicates our final position on an issue and whether our position has changed based on comments received. Our final action for each element, or where appropriate, explanation of implementation under existing regulations, is a ddressed in detail in the re ferenced sections of this preamble. NSR program element Final action Section Applicability to PM 2.5 precursors.... SO 2 – Must be regulated as precursor NO X – Presumed regulated VOC – Presumed not regulated Ammonia – Presumed not regulated V.A

PSD major source threshold............ 100/250 tons per year (tpy)....................... V.B NA NSR major source threshold .... 100 tpy ..................................................... V.B Significant emissions rate ............... Direct PM 2.5 emissions – 10 tpy SO 2 precursor – 40 tpy NO X precursor – 40 tpy, if regulated V.C & V.D

Condensable PM 2.5 emissions......... Included in direct PM 2.5 emissions for major NSR applicability determinations after the end of the transition period (changed based on comments received) V.E

12Control technology: BACT and Applies for direct PM 2.5 emissions, SO 2 , V.F.1 & LAER and other precursors if regulated. V.G Prevention of significant deterioration Air quality impact analysis ............. Preconstruction monitoring............. NA NSR Statewide compliance and alternative siting analyses NA NSR offsets .............................. Interpollutant offsetting ..................

Transition for PSD .......................... Transition for NA NSR................... SIP development period..................

Tribal Concerns...............................

Minor NSR......................................

NSR transport option ...................... Increments, SILs and SMCs covered in a separate rulemaking Applies for PM 2.5 ...................................... Applies for PM 2.5 (finalizing options 1 & 3) Applies for direct PM 2.5 emissions and precursors, if regulated Applies for direct PM 2.5 emissions and precursors, if regulated Allowed on a regional or statewide basis; EPA is issuing guidance with recommended regional hierarchies and trading ratios (changed based on comments received) Continues to use PM 10 as a surrogate Applies through an approved SIP or through 40 CFR part 51, appendix S Clarifie s that major NSR does not apply to precursors during the SIP development period in attainment areas (changed based on comments received) Cross references to proposed NSR rules for Indian country Clarifies that State and local regulatory programs must include PM 2.5 requirements for minor sources Transport cl assification not available ....... V.F.2

V.F.3

V.F.4

V.G

V.G.1 - 3

V.G.4

V.H V.I

V.J

V.K

V.L

V.M The provisions of the PM 2.5 major NSR program finalized in this action are codified as revisions in the previously existing regulatory te xt. The revisions to NA NSR are codified in 40 CFR 51.165 and appendix S to 40 CFR part 51. The PSD revisions are codified in 40 CFR 51.166 and 52.21.

13V. Rationale for Final Actions In this section we discuss each element of our proposal for this rulemaking, explain our final action, discuss the rationa le for our final action, and summarize the major public comments we received. The full summary of public comments on the proposal, along with our responses, can be found in the docket for this rulemaking. 7
A. Applicability of NSR to Precursors of PM 2.5 in the Ambient Air Scientific research has shown that vari ous pollutants can cont ribute to ambient
PM 2.5 concentrations. In addition to direct PM 2.5 emissions, these include the following
precursors:

• Sulfur dioxide (SO 2 );

• Oxides of nitrogen (NO X );

• Volatile organic compounds (VOC); and

• Ammonia. These gas-phase precursors undergo chemical reactions in the atmosphere to form secondary PM. Formation of secondary PM depends on numerous f actors including the concentrations of precursors; the concentr ations of other gaseous reactive species; atmospheric conditions including solar radiati on, temperature, and relative humidity; and the interactions of precursors with preexisting particles and with cloud or fog droplets. Several atmospheric aerosol sp ecies, such as ammonium nitrate and certain organic compounds, are semi-volatile and are found in both gas and particle phases. Given the

7 See “Implementation of the New Source Re view (NSR) Program for Particulate Matter Less Than 2.5 Micrometers in Diameter (PM 2.5 ); Response to Comments,” U.S. Environmental Protection Agency. It can be viewed or downloaded at www.regulations.gov , Docket ID No. EPA-HQ-OAR-2003-0062. 14complexity of PM formation processes, new information from the scientific community continues to emerge to improve our understand ing of the relationship between sources of PM precursors and secondary particle formation. Precursors contribute sign ificantly to ambient PM 2.5 concentrations, producing approximately half of the concentration na tionally. In most areas of the country, PM 2.5 precursor emissions are majo r contributors to ambient PM 2.5 concentrations. The relative contribution to ambient PM 2.5 concentrations from each of these pollutants varies by area. The relative effect of reduci ng emissions of these pollutant s is also highly variable.
Some PM 2.5 precursors are already subject to major NSR under other NAAQS, as shown in the following table:

PM 2.5 precursor Existing program covera ge for major NSR applicability NO X ........................................ NA NSR and PSD for NO 2 and Ozone SO 2 ......................................... NA NSR and PSD for SO 2 VOC ....................................... NA NSR and PSD for Ozone Ammonia................................ No coverage for NSR In the subsections that follow, we firs t discuss our legal authority under the Act for regulating precursors to the formation of cr iteria pollutants, and then discuss our final action for each of the PM 2.5 precursors. 1. What is EPA’s legal aut hority to regulate precursors? As we discussed in the November 1, 2005 proposal, we interpret the Act to not only provide explicit authority for EPA to re gulate precursors, but also to grant us discretion to determine how to address precursors for part icular regulatory purposes. This reading is based on section 302(g) of th e Act, which defines th e term “air pollutant” to include “any precursors to the formation of any air pollutant, to the extent the 15Administrator has identified such precursor or precursors for the particular purpose for which the term ‘air pollutant’ is used.” Th e first clause of this second sentence in section 302(g) explicitly author izes the Administrator to id entify and regula te precursors as air pollutants under other pa rts of the Act. In additi on, the second clause of the sentence indicates that the Administrator has discretion to identify which pollutants should be classified as precursors for particular regulatory purposes. Thus, we do not necessarily construe the Act to require that EPA identify a particular precursor as an air pollutant for all regulatory pur poses where it can be demonstr ated that various programs under the Act address different aspects of the air pollutant problem. Likewise, we do not interpret the Act to require that EPA treat all precursors of a particular pollutant the same under any one program when there is a basi s to distinguish between such precursors within that program. For example, in a recent rule addressing PM 2.5 precursors for purposes of the transportation conformity program, we chose to adopt a different approach for one precursor based on the limite d emissions of that precursor from onroad mobile sources and the degree to which it contributes to PM 2.5 concentrations (70 FR 24280, May 6, 2005). Other provisions of the Act reinforce our reading of section 302(g) to mean that Congress intended precursors to NAAQS polluta nts to be subject to the air quality planning and control requirements of the Ac t, but also recognized that there may be circumstances where it is not appropriate to subject precursors to ce rtain requirements of the Act. Section 182 of the Act provides for the regulation of NO X and VOC as precursors to ozone in ozone nonattainment areas , but also provides in section 182(f) that major stationary sources of NO X (an ozone precursor) are not subject to emission 16reduction requirements for ozone where th e State shows through modeling that NO X reductions do not decrease ozone. Secti on 189(e) provides for the regulation of PM 10 precursors in PM 10 nonattainment areas, but also recognizes that there may be certain circumstances (e.g., if precursor emission s ources do not significantly contribute to PM 10 levels) where it is not appropriate to apply control requirements to PM 10 precursors. The legislative history of section 189(e) recogni zed the complexity behind the science of precursor transformation into PM 10 ambient concentrations and the need to harmonize the regulation of PM 10 precursors with other provisions of the Act: The Committee notes that some of these precursors may well be controlled under other provisions of the CAA. Th e Committee intends that . . .the Administrator will develop models , mechanisms, and other methodology to assess the significance of the PM 10 precursors in improving air quality and reducing PM 10 . Additionally, the Administrator should consider the impact on ozone levels of PM 10 precursor controls. The Committee expects the Administrator to harmonize the PM 10 reduction objective of this section with other applicable regulations of this CAA regarding PM 10 precursors, such as NO X . See H. Rpt. 101-490, Pt. 1, at 268 (May 17, 1990), reprinted in S. Prt. 103-38, Vol. II, at 3292. In summary, section 302(g) of the Act clearly calls for the regulation of precursor pollutants, but the Act also identifies circ umstances when it may not be appropriate to regulate precursors and gives the Administrator discretion to determine how to address particular precursors under various progr ams required by the Act. Due to the complexities associated with precursor emissi ons and their variability from location to location, we believe that in cer tain situations it may not be effective or appropriate to control a certain precursor under a particular regulatory program or for EPA to require similar control of a particular precu rsor in all areas of the country. 17The term “air pollutant,” as defined in s ection 302(g), is incorporated into the NSR provisions for various purposes. Thus, we interpret section 302(g) of the Act to require us to consider how to addr ess precursors under the NSR program. With regard to PSD, section 165(a)(3) of the Act states that new or modified major sources must demonstrate that emissi ons “will not cause, or contribute to, air pollution in excess of any ... NAAQS in any air quality control region ....” A source could not reasonably make this demonstrati on without considering precursors that EPA has identified for this purpose. Section 165(a)(4) of the Act states that a new or modified source must apply BACT “for each pollutant subject to regulation under this Act emitted from, or which results from, such facility.” The phrase “emitted from, or which results from” indicates that the statute is not limited to direct emissions, but rather extends to precursors as well. With regard to NA NSR, sections 172(c)(4) and 173 require States to demonstrate, among other things, that emissions from new or modified major sources are consistent with the achievement of “reasona ble further progress.” Reasonable further progress is further defined as re ductions of the relevant air pollutant, which is defined in section 302(g) to include precursors identifie d by EPA as subject to regulation for that
purpose. 2. What is EPA’s approach for addressing precursors? As proposed, we are finalizing different approaches for addressing the individual precursors to PM 2.5 under the Act’s NSR provisions. Gene rally, where the sc ientific data and modeling analyses provide reasonable cert ainty that the pollutant’s emissions are a significant contribu tor to ambient PM 2.5 concentrations, we belie ve that pollutant should 18be identified as a “regulated NSR pollutant” and subject to the PM 2.5 NSR provisions. Conversely, where the effect of a pollutant’s emissions on ambient PM 2.5 concentrations is subject to substantial uncertainty, such th at in some circumstances the pollutant may not result in formation of PM 2.5 , or control of the pollutant may have no effect or may even aggravate air quality, we generally be lieve it is unreasonable to establish a nationally-applicable presumption that the pollutant is a regulated NSR pollutant subject to the requirements of NSR for PM 2.5 . We discuss our final acti on with respect to each of the PM 2.5 precursors and the basis for that action in sections V.A.2 through 5. For those precursors that are either pres umed to be regulated or not regulated (NO X , VOC, and ammonia), a State program need not follow the presumed approach if it can be demonstrated that the precursor in ques tion is not, or is, a “sig nificant contributor”
to PM 2.5 concentrations within the specific area. “Significant cont ribution” in this context is a different concept than that in section 110(a)(2)(D) of the Act. Section 110(a)(2)(D) of the Act prohibits States from emitting air pollutants in amounts which significantly contribute to nonatta inment or other air quality problems in other States. Consistent with the previous discussion of sections 189(e) and 302(g), we are clarifying that the use in this NSR implementation rule of the term “significant contribution” to the
area’s PM 2.5 concentration means that a significant change in emissions of the precursor from sources in the area would be project ed to provide a significant change in PM 2.5 concentrations in the area. For example, if modeling indicates th at a reduction in an
area’s NO X emissions would reduce ambient PM 2.5 levels in the area, but that a reduction in ammonia emissions would result in virtually no change in ambient PM 2.5 levels, this would suggest that NO X is a significant contributor but that ammonia is not. We are not 19establishing in this rule a quantitative test for determining whether PM 2.5 levels in an area change significantly in res ponse to reductions in precursor emissions in the area. However, in considering this question, it is relevant to consider that relatively small reductions in PM 2.5 levels are estimated to result in worthwhile public health benefits. This approach to identifying a precurso r as a regulated NSR pollutant reflects atmospheric chemistry conditions in the ar ea and the magnitude of emissions of the precursor in the area. Assessments of whether it is technically feasible and cost effective to control particular emissions units at a s ource should be part of the later BACT determination within a permit action, and should occur after the basic assessment of which precursors are to be regulated NS R pollutants in an area is completed. Most commenters did not question our lega l authority to identify and regulate
PM 2.5 precursors. However, some commenters argued, based on the la nguage of sections 302(g) and 189(e) of the Act, that once we have designated a compound as a precursor, we do not have discretion to presumptivel y exclude it from NSR requirements. Other commenters on this issue indi cated that we do have such discretion, based on the de minimis doctrine of the Alabama Power decision or on practical implementation considerations such as the uncertainty in measuring and modeling the effect of PM 2.5 precursors. We do not agree with the comment that the Act does not give us discretion to presumptively exclude a PM 2.5 precursor from NSR requirement s. As stated previously, we believe that section 302( g) allows the Administrator to presumptively not require certain precursors to be addressed in PM 2.5 NSR programs generally, while allowing the State or EPA to make a finding for a specific ar ea to override the general presumption. In 20the following pollutant-specific sections of this preamble, we find that at this time there is sufficient uncertainty regarding whether cert ain precursors significantly contribute to
PM 2.5 concentrations in all areas such that the policy set forth in this rule does not presumptively require certain precursors (ammonia, VOC) to be controlled in each area. However, the State or EPA may reverse the presumption and regulate a precursor if it provides a demonstration showing that the precursor is a significant contributor to PM 2.5 concentrations in the area. In addition, if in the State’s NSR program adoption process a commenter provides additional information suggesting an alternative policy for regulating a particular precursor , the State will need to respon d to this information in its rulemaking action. Hence, we continue to believe that the Act provides us the authority not only to identify and regulate precursors to PM 2.5 , but also to treat precursors of the same pollutant differently under the same program.
3. Final Action on SO 2 Sulfur dioxide is emitted mostly from the combustion of fossil fuels in boilers operated by electric utilities and other industrial sources. Less than 20 percent of SO 2 emissions nationwide are from other sources, mainly other industrial processes such as oil refining and pulp and paper production. Th e formation of sulfuric acid from the oxidation of SO 2 is an important process affecting mo st areas in North America. There are three different pathways for this transformation. First, gaseous SO 2 can be oxidized by the hydroxyl ra dical (OH) to cr eate sulfuric acid. This gaseous SO 2 oxidation reaction occurs slowly and only in the daytime. Second, SO 2 can dissolve in cloud wate r (or fog or rainwater), and there it can be
21oxidized to sulfuric acid by a variety of oxidants, or through catalysis by transition metals such as manganese or iron. If ammonia is present and taken up by the water droplet, then ammonium sulfate will form as a precipita te in the water drop let. After the cloud changes and the droplet evaporates, the sulfuric acid or ammonium sulfate remains in the atmosphere as a particle. This aqueous pha se production process involving oxidants can be very fast; in some cases all the available SO 2 can be oxidized in less than an hour. Third, SO 2 can be oxidized in reactions in th e particle-bound water in the aerosol particles themselves. This process ta kes place continuousl y, but only produces appreciable sulfate in alkalin e (dust, sea salt) coarse pa rticles. Oxidation of SO 2 has also been observed on the surfaces of black carbon an d metal oxide particles. During the last 20 years, much progress has been made in understanding the first two major pathways, but some important questions still remain about the smaller third pathway. Models indicate that more than half of the sulfuric acid in the eastern United States and in the overall atmosphere is produced in clouds. The sulfuric acid formed from these pa thways reacts readily with ammonia to form ammonium sulfate, (NH 4 ) 2 SO 4 . If there is not enough ammonia present to fully neutralize the produced sulfur ic acid (one molecule of sulfuric acid requires two molecules of ammonia), part of it exists as ammonium bisulfate; NH 4 HSO 4 (one molecule of sulfuric acid and one molecule of ammonia) and the particles are more acidic than ammonium sulfate. In certain situations (in the abse nce of sufficient ammonia for neutralization), sulfate can exist in particles as sulfuric acid, H 2 SO 4 . Sulfuric acid often exists in the plumes of stacks where SO 2 , sulfur trioxide (SO 3 ), and water vapor are in much higher concentrations than in the ambient atmosphere, but these concentrations
22become quite small as the plume is cooled and diluted by mixing. Because sulfate is a significant component (e.g., ranging from 9 percent to 40 percent) of PM 2.5 concentrations, and contributes to other air quality problems in all regions of the country, we proposed to require States to treat SO 2 as a PM 2.5 precursor in all areas. We are retaining the same approach for SO 2 in this final rule. Sulfate is an important precursor to PM 2.5 formation in all areas, and has a strong regional impact on
PM 2.5 concentrations. This approach is consiste nt with past EPA regulations, such as the Clean Air Interstate Rule (CAIR), the Clean Ai r Visibility Rule, the Acid Rain rules, and the Regional Haze rule, each of which require SO 2 reductions to address fine particle pollution and related air quality problems. Finally, we do not believe that regulating SO 2 as a precursor to PM 2.5 is likely to add a major burden to sources, as SO 2 is already regulated as part of the NSR program for the SO 2 NAAQS. Most commenters who addressed this issue agreed that SO 2 should be regulated as
a PM 2.5 precursor, although one onl y supported regulation of SO 2 as a precursor in NA NSR, and not under PSD. Two commenters disagreed that SO 2 acts as precursors to
PM 2.5 in all cases and indicated that it should not be regul ated as an “always-in”
precursor. We find the commenters’ arguments against regulating SO 2 as a precursor unpersuasive. Sulfate is a significant fraction of PM 2.5 mass in all nonattainment areas currently, and although large SO 2 reductions are projected fr om electric generating units with the implementation of the CAIR program , sulfate is still pr ojected to be a key contributor to PM 2.5 concentrations in the future, in both attainment and nonattainment areas. Sulfur dioxide emissions also lead to sulfate form ation on both regional and local 23scales.
4. Final Action on NO X The sources of NO X are numerous and widespread. The combustion of fossil fuel generates the majority of NO X emissions, with large contri butions from power generation and mobile sources. Nitrates ar e formed from the oxidation of NO X into nitric acid (HNO 3 ) either during the daytime (reaction with OH) or during the night (reactions with ozone and water). Nitric acid continuously transfers between the gas and the condensed phases through condensation a nd evaporation processes in the atmosphere. However, unless it reacts with other species (such as ammonia, sea salt, or dust) to form a neutralized salt, it will volatilize a nd not be measured using standard PM 2.5 measurement techniques. The formation of aerosol ammonium nitrate is favored by the availability of ammonia, low temperatures, and high relative humidity. Because ammonium nitrate is semivolatile and not stable in higher temperatur es, nitrate levels are typically lower in the summer months and higher in the winter m onths. The resulting ammonium nitrate is usually in the sub-micrometer particle size range . Reactions with sea salt and dust lead to the formation of nitrates in coarse particle s. Nitric acid may be dissolved in ambient aerosol particles. Based on a review of speciated monitoring da ta analyses, it is a pparent that nitrate concentrations vary significantly across the c ountry. For example, in some southeastern locations, annual average nitrate levels are in the range of 6 to 8 percent of total PM 2.5 mass, whereas nitrate comprises 40 percent or more of PM 2.5 mass in certain California locations. Nitrate formation is favored by the availability of ammonia, low temperatures, and high relative humidity. It is also depe ndent upon the relative degree of nearby SO 2 24emissions because ammonia reacts preferentially with SO 2 over NO X . Reductions in
NO X emissions are expected to reduce PM 2.5 concentrations in most areas. However, it has been suggested that in a limited number of areas, NO X control would result in increased PM 2.5 mass by disrupting the ozone cycle and leading to increased oxidation of
SO 2 to form sulfate particles, which ar e heavier than nitrate particles. Because of these factors, we are finalizing our proposed approach to NO X as a precursor to PM 2.5 for the NSR program. Under this approach, NO X is presumed to be a significant contribu tor to ambient PM 2.5 concentrations in all PSD and NA NSR areas. However, a State or EPA may rebut this pr esumption for a specific area if the State demonstrates to the Administrator’s sa tisfaction or EPA de monstrates that NO X emissions in that area are not a significan t contributor to that area’s ambient PM 2.5 concentrations. If a State or EPA makes such a demonstration, NO X would not be considered a PM 2.5 precursor under the NSR program in th at area. If a State or EPA does not make such a demonstration, NO X must be regulated as a precursor under the PSD, NA NSR, and minor source programs for PM 2.5 . As discussed previously, this “presumed-in” approach is warranted ba sed on the well-known transformation of NO X into nitrates, coupled with the fact that ni trate concentrations va ry significantly around the country. This approach is consistent with other recent EPA regulations requiring
NO X reductions, which will reduce fine partic le pollution, such as the CAIR and a number of rules targeting onroad and nonroad engine emissions. We had proposed that NO X be presumed to be a precu rsor in any State that EPA has identified as a source of the PM 2.5 interstate transport problem. In the final rule, we have dropped this requirement to be consis tent with EPA’s Clean Air Fine Particle 25Implementation Rule published on April 25, 2007. 72 FR 20586. Such a requirement is not necessary in this rule because States that contribute to downwind nonattainment for
PM 2.5 are otherwise required to address transported NO X emissions under the CAIR. In areas where NO X is regulated as a precursor to PM 2.5 , we do not believe that this is likely to add a major burden to sources, as NO X is already a regulated NSR pollutant. This is because NO X is an identified precursor for the ozone NAAQS and an indicator for the NO 2 NAAQS. Several commenters agreed that NO X should be regulated under major NSR as a precursor to PM 2.5 . Some of these commenters believe that States should not have the opportunity to demonstrate otherwise, or in dicated that a waiver for exclusion of NO X as a precursor should be allowed only if downwi nd States approve such a waiver. A few commenters stated that NO X should not be regulate d as a precursor to PM 2.5 in the major NSR program, either on grounds of scientific uncertainty regardi ng the impact of NO X emissions on ambient PM 2.5 concentrations or on policy grounds (i.e., because NO X is already regulated under NSR for other NAAQS). We are not persuaded by the argument that NO X should not be regulated as a
PM 2.5 precursor because it is a regulated pol lutant under other NAAQS. We do not find the degree of scientific uncertainty regarding PM 2.5 formation from NO X to be great enough to preclude regulation of NO X as a precursor with an opportunity for a case-bycase demonstration that NO X is not a significant contributor. Furthermore, the fact that we regulate NO X for other NAAQS under the NSR pr ogram does not by itself justify declining to regulate NO X as a PM 2.5 precursor in circumstances where NO X also significantly contributes to PM 2.5 formation. As noted earlier, the regulation of NO X as a 26precursor for PM 2.5 is not expected to add a major bur den to regulated sources that are already required to limit NO X emission to meet other NAAQS. We disagree with the commenters who believe that emissions of NO X cannot be correlated to PM 2.5 formation, or that it is unclear when NO X acts as a precursor. As discussed previously, our decision to regulate NO X as a precursor to PM 2.5 is based on the well-known transformation of NO X into nitrates. Neverthele ss, nitrate concentrations vary significantly across the country. As a result, we be lieve that the “presumed-in” approach is appropriate for NO X since a State can demonstrate that NO X should not be a precursor in a given area or region. While we recognize that NO X emissions can affect PM 2.5 concentrations in downwind areas, we disagree that approval fr om downwind States should be required for a State to exclude NO X as a PM 2.5 precursor for a particular area. This is because States that contribute to downwind nonattainment for PM 2.5 are otherwise required to address transported NO X emissions under the CAIR. 5. Final Action on VOC The organic component of ambient partic les is a complex mixture of hundreds or even thousands of organic compounds. These organic compounds are either emitted directly from sources (i.e., primary organic aer osol) or can be formed by reactions in the ambient air (i.e., secondary organic aerosol, or SOA). Volatile organic compounds are key precursors in the formation processe s for both SOA and ozone. The relative importance of organic compounds in the forma tion of secondary organic particles varies from area to area, depending upon local emi ssions sources, atmospheric chemistry, and season of the year. 27The lightest organic molecules (i.e., mo lecules with six or fewer carbon atoms) occur in the atmosphere mainly as vapors and typically do not directly form organic particles at ambient temperatures due to the high vapor pressure of their products. However, they participate in atmospheric ch emistry processes resulting in the formation of ozone and certain free radical compounds (s uch as OH) which in turn participate in oxidation reactions to form SOA, sulfates, a nd nitrates. These VOCs include all alkanes with up to six carbon atoms (from methane to he xane isomers), all alkenes with up to six carbon atoms (from ethene to hexene isomers) , benzene, and many low-molecular weight carbonyls, chlorinated compounds , and oxygenated solvents. Intermediate weight organic molecu les (i.e., compounds w ith 7 to 24 carbon atoms) often exhibit a range of volatilities and can exist in both the gas and aerosol phase at ambient conditions. For this reason th ey are also referred to as semivolatile compounds. Semivolatile compounds react in the atmosphere to form SOA. These chemical reactions are accelerated in warmer temperatures, and studies show that SOA typically comprises a higher percentage of carbonaceous PM in the summer as opposed to the winter. The production of SOA from the atmospheric oxidation of a specific VOC depends on four factors: its atmospheric abundance, its chemical reactivity, the availability of oxidants (ozone, OH, HNO 3 ), and the volatility of its products. In addition, recent work suggests that the pres ence of acidic aerosols may lead to an increased rate of SOA formation. Aromatic compounds such as toluene, xylene, and trimethyl benzene are cons idered to be the most significant anthropogenic SOA precursors and have been estimated to be responsible for 50 to 70 percent of total SOA in some airsheds. Man-made sources of aromatics gases include mobile sources, 28petrochemical manufacturing, and solvents. Some of the biogenic hydrocarbons emitted by trees are also considered to be importa nt precursors of secondary organic PM. Terpenes (and b-pinene, limonene, carene, etc.) and the sesquiterpenes are expected to be major contributors to SOA in areas with signif icant vegetation cover, but isoprene is not. Terpenes are very prevalent in areas with pi ne forests, especially in the southeastern United States. The rest of the anthropoge nic hydrocarbons (higher alkanes, paraffins, etc.) have been estimated to contribute 5 to 20 percent to the SOA concentration depending on the area. The contribution of the primary and sec ondary components of organic aerosol to the measured organic aerosol concentrations remains a comp lex issue. Most of the research performed to date has been done in southern California, and more recently in central California, while fewer studies have been completed on other parts of North America. Many studies suggest that the pr imary and secondary contributions to total organic aerosol concentrations are highly variable, even on short time scales. Studies of pollution episodes indicate that the contribution of SOA to th e organic PM can vary from 20 percent to 80 percent during the same day. Despite significant advances in understa nding the origins and properties of SOA, it remains probably the leas t understood component of PM 2.5 . The reactions forming secondary organics are complex, and the num ber of intermediate and final compounds formed is voluminous. Some of the best e fforts to unravel the chemical composition of ambient organic aerosol matter have result ed in quantifying the concentrations of hundreds of organic compounds representing onl y 10 to 20 percent of the total organic aerosol mass. For this reason, SOA continues to be a significant topic of research and 29investigation. Current scientific and technical informa tion shows that carbonaceous material is a significant fraction of total PM 2.5 mass in most areas, that certain VOC emissions are precursors to the formation of SOA, and th at a considerable fraction of the total carbonaceous material originates from local as opposed to regional sources. However, while significant progress ha s been made in understanding the role of gaseous organic material in the formation of organic PM , this relationship remains complex. We recognize that further research and technical tools are n eeded to better characterize emissions inventories for specific VOC, and to determine the extent of the contribution of specific VOC to organic PM mass. As a result, this final rule does not, in general, require regulation of VOC as a precursor to PM 2.5 for the NSR program. However, a State may demonstrate to the Administrator’s satisfaction or EPA may dem onstrate that VOC emissions in a specific area are a significant contributo r to that area’s ambient PM 2.5 concentrations. After such a demonstration, the State would regulate VOC (or a subset of VOC) as a PM 2.5 precursor for the NSR program in that area. That is, the State would need to regulate construction and modification of stationary sources that increase emissions of VOC in that area to assure that these emissions do not interfere w ith reasonable further pr ogress or the ability of that area to attain or maintain the PM 2.5 NAAQS. We believe that this “presumed-out” appr oach is appropriate for VOC because of the complexity in assessing the role of VOC in PM 2.5 formation, as discussed previously. Where the effect of a pollutant’s emissions on ambient PM 2.5 concentrations is subject to this degree of uncertainty, we do not have justification to establish a nationally-applicable 30presumption that the pollutant is a regulated NSR pollutant subject to the requirements of NSR for PM 2.5 . Under the circumstances, we believe the best policy is to continue to regulate VOC under NSR as a precursor to oz one in all areas, which will potentially provide a co-benefit for PM 2.5 concentrations despite the uncertainty in PM 2.5 formation from VOC. As discussed pr eviously, we do not find it appr opriate to utilize the same approach for NO X because the scientific data and modeling analyses provide more certainty that NO X emissions are a significant contributor to ambient PM 2.5 concentrations. Note that we intend to regulate high molecular weight VOC (with 25 carbon atoms or more and low vapor pressure) as direct PM 2.5 emissions because they are emitted directly as primary organic particles an d exist primarily in the condensed phase at ambient temperatures. See section V.E following for more on the regulation of such “condensables.” Most commenters agreed with the “p resumed-out” approach for VOC. One commenter said that the role of VOC in the formation of PM 2.5 is sufficiently understood to recommend a “waiver” approach for this pollutant in the same way as NO X is treated for PM 2.5 in the rule. As discussed previously, the reactions forming secondary organics are complex and the number of intermediate and final comp ounds formed is voluminous. Some of the best efforts to unravel the chemical compos ition of ambient organic aerosol matter have merely been able to quantify the concen trations of hundreds of organic compounds representing only 10 to 20 percent of the to tal organic aerosol mass. For this reason, SOA continues to be a significant topic of re search and investigation. Accordingly, we 31do not agree with the commenter who suggested a waiver or “presumed-in” approach for VOC. We continue to believe that our “pre sumed-out” approach is most appropriate for VOC and have included this approach in the final rules.
6. Final Action on Ammonia Ammonia (NH 3 ) is a gaseous pollutant that is emitted by natural and anthropogenic sources. Emissions inventorie s for ammonia are considered to be among the most uncertain of any speci es related to PM. Ammonia se rves an important role in neutralizing acids in clouds , precipitation, and particles. In particular, ammonia neutralizes sulfuric acid and nitric acid, the two key contributors to acid deposition (acid rain). Deposited ammonia al so can contribute to problems of eutrophication in water bodies, and deposition of ammonium particles may effectively result in acidification of soil as ammonia is taken up by plants. The NARSTO Fine Particle Assessment 8 indicates that reducing ammonia emissions where su lfate concentrations are high may reduce
PM 2.5 mass concentrations, but may also in crease the acidity of particles and precipitation. An increase in particle acidi ty is suspected to be linked with adverse human health effects and with an increas e in the formation of secondary organic compounds. Based on this information and further insights gained from the NARSTO Fine Particle Assessment, it is apparent that the formation of particles related to ammonia emissions is a complex, nonlinear process. Though recent studies have improved our understanding of the role of ammonia in

8 NARSTO (2004) “Particulate Matter Assessment for Policy Makers: A NARSTO Assessment.” P. McMurry, M. She pherd, and J. Vickery, eds. Cambridge University Press, Cambridge, England. ISBN 0 52 184287 5. See the docket for this rulemaking, Docket ID No. EPA-HQ-OAR-2003-0062, or http://www.narsto.org/section.src?SID=6 32aerosol formation, ongoing research is requi red to better describe the relationships between ammonia emissions, PM concentratio ns, and related impacts. The control techniques for ammonia and the analytical tools to quantify the impacts of reducing ammonia emissions on atmospheric aerosol fo rmation are both evolving. Also, areaspecific data are needed to evaluate the e ffectiveness of reducing ammonia emissions on reducing PM 2.5 concentrations in different areas, and to determine where ammonia decreases may increase the acidity of particles and precipitation. Due to the considerable uncertainty rela ted to ammonia as a precursor, our final rules do not require ammonia to be regulated as a PM 2.5 precursor but do give States the option to regulate ammoni a as a precursor to PM 2.5 in nonattainment areas for purposes of NSR on a case-by-case basis. Consistent with our proposal, if a State demonstrates to the Administrator’s satisfaction that ammonia em issions in a specific nonattainment area are a significant contributor to that area’s ambient PM 2.5 concentrations, the State would regulate ammonia as a PM 2.5 precursor under the NSR progr am in that nonattainment area. Once this demonstration is made, a mmonia would be a “regulated NSR pollutant” under NA NSR for that particular nonattainme nt area, and the State would need to regulate construction and modifi cation of stationary sources that increase emissions of ammonia in that area to assure that thes e emissions do not interfere with reasonable further progress or the ability of that area to attain or maintain the PM 2.5 NAAQS. In all other nonattainment areas in that State and nationally, ammonia would not be subject to the NSR program. In addition, the action of any State identifying ammonia emissions as a significant contributor to a nonattainment area’s PM 2.5 concentrations, or our approval of a non-attainment SIP doing so, does not make ammonia a regulated NSR pollutant for 33the purposes of PSD in any attainment or unclassifiable areas na tionally. This is consistent with our proposal (70 FR 66036) and no commenters took issue with the proposal. We also retain the ability to make a technical de monstration for any area in a State, if appropriate, to reverse the presump tion and require ammonia to be addressed in that State’s nonattainment area plan. We elected to finalize the proposed approach because of continued uncertainties regarding ammonia emission inventories and th e effects of ammonia emission reductions. Ammonia emission inventories are presently ve ry uncertain in most areas, complicating the task of assessing potentia l impacts of ammonia emissions reductions. In addition, data necessary to understand the atmospheri c composition and balance of ammonia and nitric acid in an area are not widely availabl e, making it difficult to predict the results of potential ammonia emission reductions. Ammonia reductions may be effective and appropriate for reducing PM 2.5 concentrations in selected lo cations, but in other locations such reductions may lead to minimal reductions in PM 2.5 concentrations and increased atmospheric acidity. Research projects con tinue to expand our collective understanding of these issues, but at this time we believe this case-by-case approach for nonattainment areas is appropriate given that there is su fficient uncertainty regarding the impact of ammonia emission reductions on PM 2.5 concentrations in all nonattainment areas. In light of these uncertainties, we encourage States to continue efforts to better understand the role of ammonia in their fi ne particle problem areas. Several commenters agreed with our “p resumed-out” approach for ammonia. One of these commenters recommended that we recognize the role ammonia plays in
PM 2.5 formation and develop a policy to requ ire the minimization and mitigation of 34known emissions of ammonia, while another sugge sted that we require States to initiate comprehensive ambient air monitoring networks to determine the extent of local affects of ammonia. Four commenters did not support treating ammonia as a PM 2.5 precursor under any circumstances. Three of these commenters stated that if EPA permits States to demonstrate that ammonia s hould be regulated as a PM 2.5 precursor for NSR purposes, we should make clear that ammonia emissi ons from the operation of an air pollution control system to control NO X should not factor into such a demonstration. Two commenters preferred that we use the “presumed-in” approach for ammonia, as for NO X . One of these commenters stated th at the “presumed-out” approach would improperly delegate our authority to regulate ammonia as a PM 2.5 precursor to the States and would reverse Congress’ re quirement to regulate PM precursors unless the emissions are not part of the problem, instead taking the approach that we will “not regulate unless proven to be part of the problem.” We continue to believe that the “presume d-out” approach is most appropriate for ammonia. As discussed previously, cons iderable uncertainties remain regarding ammonia emission inventories and the effect s of ammonia emission reductions. As a result, we do not believe it advisable to a dopt a “presumed-in” approach. However, where a State can gather sufficient data to demonstrate that reductions in ammonia emissions will decrease ambient concentrations of PM 2.5 in a particular nonattainment area, we believe that the Stat e should be allowed to regula te ammonia emissions under its
PM 2.5 NSR program for that area. We do not believe that this approach impr operly delegates author ity to the States. 35The final rule establishes a general presum ption for all nonattainment areas through this rulemaking process, and allows for the presumption to be modified by the State on a case-by-case basis with EPA approval. Under the Clean Air Fine Particle Implementation Rule (72 FR 20586, April 5, 2007) (addressing vari ous nonattainment plan elements other than NSR), we still retain the ability to make a technical demonstration for any area if appropriate to reverse the presumption and require ammonia to be addressed in its nonattainment area plan. As discussed previously in section V.A.1, we interpret the Act to allow the “presumed-out” approach adopted in the final rule. We agree with the commenter who suggest ed that we continue research on the role of ammonia in the formation of PM 2.5 . We believe that it is prudent to continue research on ammonia control technologies and the ammonia-sulfate-nitrate-SOA equilibrium before undertaking a broad nationa l program to reduce ammonia emissions. As we develop a greater understanding about th e potential air quality effects of reducing ammonia emissions in specific nonattainment areas, it may be appropriate for ammonia reduction strategies to be included in future SI Ps. At this time, how ever, we believe that reducing SO 2 and NO X emissions will achieve significant reductions in ambient PM 2.5 concentrations. Regarding the comment related to ammonia emissions from NO X control systems, we believe that a State should evaluate all sources of ammonia emissions when determining whether to re gulate ammonia under its PM 2.5 NSR program for a particular nonattainment area. However, we also encour age States to be mindful of the potential tradeoff in terms of ambient PM 2.5 concentrations that may be related to reducing 36ammonia emissions from NO X control systems.
B. Major Stationary Source Threshold for PM 2.5 The major NSR program applies to constr uction of major stationary sources and major modifications at major stationary source s. A stationary source is a “major source” if its actual emissions or its potential to em it for a specific pollutant equals or exceeds the major source threshold for that pollutant established in the Act. Different pollutants, including precursors, are not summed to determine applicability. Sections 169 and 302(j) of the Act contai n definitions of “major emitting facility” and “major stationary source” that apply to programs implemented under part C and subpart 1 of part D of the Act (PSD and NA NSR, respectively). Consistent with our proposal, these final rules follow these defi nitions for purposes of defining a major emitting facility or major stationary source th at would be subject to major NSR. The thresholds set out in the definitions are a pplied to each relevant pollutant individually, that is, to direct PM 2.5 emissions and to emissions of each pollutant identified as a PM 2.5 precursor for the applicable NSR program. Under the final rules, the major source thresholds are as follows:
PSD ........................... 100 tpy for source categories listed in 40 CFR 51.166(b)(1)(i)(a) and 52.21(b)(1)(i)(a) 250 tpy for all other source categories NA NSR.................... 100 tpy for all source categories No regulatory change is required to impleme nt this approach to the major source thresholds for direct PM 2.5 emissions and the PM 2.5 precursors. See 40 CFR 51.165(a)(1)(iv)(a), 51.166(b)(1)(i ), 52.21(b)(1)(i), and part 51, appendix S, section
II.A.4. 37This approach is consistent with how we treat other criteria pollutants that are covered by subpart 1 of part D of the Act. Nonattainment NSR programs under subpart 1 do not include a tiered classification syst em such as the one required for ozone nonattainment areas under subpart 2 of part D. We do not interpret subpart 4 of part D of the Act (creating “serious” and “moderate” classifications for PM 10 nonattainment areas) as applying to PM 2.5 . Although our approach is consistent with sections 169 and 302(j) and subpart 1 of part D of the Act, it results in a higher major source threshold in PM 2.5 nonattainment areas than the major source threshold that applies in some PM 10 nonattainment areas under subpart 4 of part D of the Act. Th is is because section 189(b) of the Act establishes a 70-tpy major source threshold for “serious” PM 10 nonattainment areas while “moderate” PM 10 nonattainment areas apply a 100-t py major source threshold based on the definition in section 302(j). We do not believe the Act gives us the discretion to promulgate a lower major source threshold for pollutants such as PM 2.5 that are only subject to subpart 1 of part D of the Act. Our emissions inventory data do not indicate that this situation will adversely impact attainment of the PM 2.5 NAAQS. These data indicate that a significant number of sources have actual PM 2.5 emissions in the 100 to 250 tpy range. Additionally, our more current inventory data show that the number of sources that would be covered as major sources by a lower major source threshold w ould not increase subs tantially unless the threshold were lowered to 20 tpy or below. Thus, even if EPA had the discretion to adopt a 70-tpy major source threshold for PM 2.5 nonattainment areas, our data indicate that few additional sources would be subjec t to the major NSR program in PM 2.5 nonattainment 389 areas. We believe that States should consider such information in developing their own SIP-approved NSR programs. For example, if construction of PM 2.5 sources emitting 99 tpy with no major NSR controls and without mitigation would undermine a State’s ability to achieve reasonable further progress or attain the PM 2.5 NAAQS, the State should consider imposing emissions controls or ot her requirements on these sources through the State’s minor NSR program. Note that such programs are required under the existing statute and regulations to assure that the NAAQS are achieved. See section 110(a)(2)(C) of the Act and 40 CFR 51.160. In addition, St ates may address such sources through other elements in their nonattainment area SIPs that are not statutorily bound to the definition of major source, as the major NSR pr ogram is. We reiterat e that since we do not interpret subpart 4 of the Act to apply to PM 2.5 , we do not believe that we have discretion under section 302(j) of the Act to define a lower major source threshold for pollutants such as PM 2.5 that are only subject to subpa rt 1 of part D of the Act. Some commenters indicate d that State minor NSR programs would not be sufficient to address such sources due to interstate transport and the existence of interstate
PM 2.5 nonattainment areas. These commenters indicated that a lower major source threshold for PM 2.5 sources located in designated nona ttainment areas should be applied uniformly throughout the entire nonattainment area, which would not be possible when minor NSR programs are defined on a State-by-State basis. We believe, to the contrary, that States can coordinate their minor NSR programs

9 See “NEI-PM 2.5 Source Analysis” in the docket for this rulemaking, Docket ID No. EPA-HQ-OAR-2003-0062. 39to address interstate PM 2.5 nonattainment areas, and we encourage them to do so. In addition, we note that the impacts of direct PM 2.5 emissions are generally felt primarily in the local area. One commenter stated that in order to address the impact of high PM concentrations, the Act mandates EPA to de fine a criteria pollutant’s NSR major threshold at levels less than 100 tpy. The commenter gave the example of subparts 2 and 4 of part D of the Act, which define lower major source thresholds for certain classifications of ozone and PM 10 nonattainment areas, resp ectively. The commenter argued that it is unreasonable for us to assert that subpart 4 does not apply to this rule because it regulates all PM with a diameter of less than 10 micrometers, which includes
PM 2.5 . The commenter believes that we recogni zed as much in our proposal preamble discussion of the options for implementi ng reasonably available control technology (RACT), where we discussed pot ential approaches that “woul d be consistent with the approach set forth in the Act in subpart 4.” 70 FR 66017. This commenter stated that a reasonable interpretation of the Act requires major sources of direct PM 2.5 emissions and precursor emissions to be defined at a ba seline level of 70 tpy, and adjusted further downward as appropriate considering the ch aracteristics and potenti al impacts of the pollutants. We do not agree that subpart 4 of part D applies to PM 2.5 nonattainment areas. Subpart 4 was added to the Act by C ongress specifically to address the PM 10 NAAQS. We believe that the PM 2.5 standard should be implemented under subpart 1 of part D, which is the general provisi on of the Act related to NAAQS implementation. Part D of title I of the Act sets forth the requirements for SIPs needed to attain the NAAQS. Part D 40also includes a general provision under subpart1, which applies to all NAAQS for which a specific subpart does not exist. Because the PM 2.5 standards were not established until 1997, the nonattainment plan prov isions found in section 172 of subpart 1 apply. Subpart 4 on its face applies only to the PM 10 standard. In general, th e emphasis in subpart 4 on reducing PM 10 concentrations from certain sources of direct PM 2.5 emissions can be somewhat effective in certain PM 2.5 nonattainment areas but not in all. Contributions to
PM 2.5 concentrations are typica lly from a complex mix of so urces of primary emissions and sources of precursor emissions, which form particles thr ough reactions in the atmosphere. In addition, PM 2.5 differs from PM 10 in terms of atmospheric dispersion characteristics, chemical composition, a nd contribution from regional transport. A group of environmental commenters beli eved that EPA should be consistent with the stationary source size thresh olds proposed for RACT in option 2, see 70 FR 66019/1. In our proposal preamble discussion of RACT, while we discussed developing a classification system for PM 2.5 nonattainment areas under sec tion 172(a)(1) of subpart 1, we did not discuss subjecting PM 2.5 to the requirements of subpart 4. While our discussion of RACT contemplated a lower th reshold for RACT applicability in some
PM 2.5 nonattainment areas, we did not characterize this as defining a lower major source threshold. Moreover, section 302(j) defines a major stationary source as one that emits 100 tpy or more “except as otherwise expres sly provided.” Sin ce section 172 does not expressly provide EPA with the authority to promulgate a major source threshold below 100 tpy, we do not believe we are authorized to do so under subpart 1 of part D of the
Act. One commenter stated that the major source threshold for PM 2.5 emissions should
41be calculated using the current SO 2 and NO X definitions of major source and significant emissions rate. Specifically, the commenter s uggested that the ratio of these values (100 tpy and 40 tpy, respectively) should be multip lied by the significant emissions rate for direct PM 2.5 emissions (10 tpy; see section V.C following) to yield a PM 2.5 major source threshold of 25 tpy. As previously stated, we do not believe th at we have discretion under the Act to define a lower major source threshold under subpar t 1 of part D of the Act. In any case, the major source thresholds and si gnificant emissions rates for SO 2 and NO X were not defined in relation to one another, and ther efore their relationshi p would not provide a suitable basis for developing the PM 2.5 major source threshold from the PM 2.5 significant emissions rate. Major source thresholds are defined directly in the Act, while the significant emissions rates were codified i ndependently in regulations through a modeling analysis of ambient impacts.
C. Significant Emissions Rate for Direct Emissions of PM 2.5 The determination of what should be classi fied as a modification subject to major NSR is based, in part, on a “significant emissions rate.” 10 The major NSR regulations define this term as a rate above which a net emissions increase will trigger major NSR permitting requirements, if the increase results from a major modification. Sources are exempt from major NSR requirements if th e emissions increase resulting from a modification is below this rate because EPA considers such lower emissions increases to be de minimis for purposes of the major NSR program.

10 For additional background on EPA’s interpretation of modification and rationale for including significant emissions rates in defining major modifications, see 61 FR 38253-54 (Dec. 31, 2002). 42The significant emissions rates for th e criteria pollutants other than PM 2.5 are given in the following table: Criteria pollutant Ozone ...........................

NO 2 .............................. Particulate Matter.........

CO................................ SO 2 ............................... Lead.............................. Significan t emissions rate (tpy) VOC: Any increase up to 40 tpy (dependent on NA classification) NO X : Any increase up to 40 tpy (dependent on NA classification) NO X : 40 tpy 25 tpy, particulate matter emissions 15 tpy, PM 10 emissions 50 or 100 tpy (dependent on NA classification) 40 tpy 0.6 tpy Significant emissions rates for additional (non-criteria) polluta nts that are subject to the PSD program are contained in 40 CFR 51.166(b)(23) and 40 CFR 52.21(b)(23). For direct emissions of PM 2.5 , these final rules define the significant emissions rate as 10 tpy. This is the level that we proposed as our preferred option. This final significant emissions rate for direct PM 2.5 emissions is based fundamentally on the same approach that we used in setting the pr evious significant emissions rates for PM emissions and PM 10 emissions. Historically, the original significant em issions rate for PM (25 tpy of PM emissions) was set using a modeling analysis to determine the amount of PM emissions that a source could emit that would be unlik ely to cause ambient impacts above 4 percent

43of the PM NAAQS (measured as to tal suspended particulate (TSP)). 11 Although a range of source configurations can yield a wide range of impact s per tpy of emissions, our review of typical configurati ons of major PM sources led us to the conclusion that a major modification that increased PM emissi ons by 25 tpy or less would be unlikely to increase 24-hour average concentrations of TSP by more than 4 percent of the 24-hour TSP NAAQS. Subsequently, when we se t the significant emissions rate for PM 10 , we adjusted the rate for PM emissions using the ratio of the 24-hour PM 10 NAAQS to the 24­ hour TSP NAAQS to derive the PM 10 significant emissions rate of 15 tpy. We used the ratio of 24-hour NAAQS for this adjustment because that NAAQS was controlling for both PM and PM 10 . We used a conceptually similar methodology to derive the final PM 2.5 significant emissions rate from the rate for PM 10 . However, because the 24-hour NAAQS is not controlling for PM 2.5 , we revised the methodology to take into account the annual impact of emissions. See the proposal preamble for additional information on the methodology we used to develop the final signif icant emissions rate for direct PM 2.5 emissions (70 FR

11 The EPA established the original NAAQS for PM in terms of ambient concentrations of TSP (40 CFR 51.100(ss)). Source applicability fo r PM was determined in terms of amounts of PM emissions (40 CFR 51.100(pp)) from the aff ected source. In 1993, at 58 FR 31622 ( see page 31629), EPA eliminated TS P as the ambient indicator for measuring compliance with both the NAAQS and PSD increments. Thus, EPA no longer considers the TSP ambient indicator to be a regulated NSR pollutant. The EPA is currently evaluating whether it remains appropriate to consider PM as a “regulated NSR pollutant.” There is no NAAQS for TSP/PM, rather the standards address specific size fractions of PM, namely PM 10 and PM 2.5 . However, PM emissions, based on in-stack measurements, continue to be regulated under PSD because of the use of such emissions for evaluating compliance under a variety of CAA section 111 new source performance standards (40 CFR part 60). Given the re gulatory changes and positions taken by EPA since 1993, EPA is re-evaluating the implicati ons for PM emissions in the NSPS program (and other air programs) and will act accordingly to clarify this issue in the near-term. 4466038). Several commenters supported our approach to setting the significant emissions rate for direct PM 2.5 emissions and the level (10 t py) based on the same methodology used for PM emissions and PM 10 emissions. Numerous other commenters believe that our methodology was too conservative, and sugge sted a significant emissions rate of 15 tpy. Two commenters suggested th at we use significant emissions rate of 5 tpy or less. Another commenter suggested that we could “split the difference,” using an option that could give States and companies some flexibility : modifications less than 5 tpy of direct
PM 2.5 emissions could be considered de minimis ; modifications between 5 and 15 tpy of direct PM 2.5 emissions could choose to either de monstrate a less than a 4 percent NAAQS increase or simply be subject; and modificat ions with increases of 15 or more tpy of direct PM 2.5 emissions would be subject. We agree with commenters who indicated th at we were correct in using the same methodology for direct PM 2.5 that was used to set the significant emissions rate for PM 10 and PM emissions. We do not agree that using the same level as PM 10 emissions (15 tpy) is warranted, given the demons trated health effects of PM 2.5 . Neither do we agree that a significant emissions rate of 5 tpy or less is warranted. While our screening model runs indicated that emissions increase s in this range at facilities with short stacks can cause measurable increases in ambient PM 2.5 levels, we do not believ e that facilities at the extremes should dictate the program for all sources. We do not agree that inclusion of condens able emissions in future testing and applicability determinations ( see section V.E) is grounds for increasing the SER for direct
PM 2.5 emissions. The results of the modeling an alysis that is the basis for the SER of 4510 tpy is not affected by the nature of the direct PM 2.5 emissions (i.e., condensable or not). We also do not agree that the proportions of primary and secondary PM 2.5 that comprise ambient PM 2.5 concentrations is relevant to determining the appropriate SER for direct PM 2.5 emissions. Following our hist oric approach for PM and PM 10 , we based our analysis on determining the size of a source of direct PM 2.5 emissions that would be expected to have an ambient impact of 4 percent or more of the NAAQS. This relationship holds true regardless of the orig in of the particles that make up the ambient
PM 2.5 . The commenter’s approach (i.e., carrying out the analysis based on one-half of the NAAQS because primary PM 2.5 makes up only one-half of the ambient PM 2.5 ) implies that an increase in ambient PM 2.5 concentrations due to an increase in direct PM 2.5 emissions is somehow automatically matc hed by a like increase in the ambient concentration of secondary PM 2.5 . We do not believe that th is is a reasonable approach.
D. Significant Emissions Rates for PM 2.5 Precursors Consistent with the preferred option in the proposal, we are setting significant emissions rates for PM 2.5 precursors at the levels for thos e pollutants alr eady included in major NSR programs, as shown in the following table:

PM 2.5 precursor Significant emissions rate (equal to or exceeding) SO 2 ...................................... 40 tpy NO X ..................................... 40 tpy VOC .................................... 40 tpy Ammonia............................. Adopted in SIP VOC is presumed not to be a precursor to PM 2.5 in any attainment or unclassifiable area, unless the State demonstrates to the Administrator’s satisfaction or 46EPA demonstrates that emissions of VOC from sources in a specific area are a significant contribu tor to that area’s ambient PM 2.5 concentrations. Any State making such a demonstration would be required to adopt the 40-tpy signi ficant emissions rate unless it demonstrates that a more stringent si gnificant emissions rate (lower rate) is more appropriate. For ammonia, States determining in thei r SIPs that control of ammonia is a necessary part of a PM 2.5 control strategy in a particular area must set the significant emissions rate for ammonia. Otherwise, accord ing to the definition of “significant” in the PSD program, “any emissions rate” would be considered significant. See 40 CFR 51.166(b)(23)(ii). One commenter stated that we should not leave it to States to set significant emissions rates for ammonia. The commenter argued that EPA’s scientists should shoulder this responsibility, and the resulting si gnificant emissions rate should be subject to notice and comment. In the final rule, we are allowing those States that determine in their SIPs that control of ammonia is necessary to set the significant emissions rate for ammonia, based on the information developed for each attain ment demonstration. At this time, we believe this is more appropriate than EPA setting a single, na tionwide significant emissions rate because of the different role ammonia plays in the formation of PM 2.5 from one area to another, as well as our still-e volving understanding of th e impact of reducing ammonia emissions on ambient PM 2.5 concentrations. In add ition, we note that the SIP revisions that States undertak e to add ammonia to their NA NSR programs are subject to notice and comment rulemaking procedures. 47Numerous commenters supported our proposal to set significant emissions rates for PM 2.5 precursors at the levels already used for other purposes in the NSR program. One commenter indicated that since roughly half or more of ambient PM 2.5 is derived from precursors, 10 tpy would be an appr opriate significant em issions rate for PM 2.5 precursor emissions. Another commenter sugge sted a significant emissions rate of 4 tpy for SO 2 and 2 tpy for NO X , based on the percentage of PM 2.5 that is typically derived from these precursors and the ratios between the existing significant emissions rates for these pollutants and the SO 2 and NO 2 annual NAAQS. Since the ambient concentrations of PM 2.5 vary across the country and since signi ficant emissions rates have not been developed as a ratio of the NAAQS, we do not believe that the suggested approach is appropriate. As discussed in the proposal, the use of existing significant emission rates where the PM 2.5 precursor is also regulated under NS R as a separate criteria pollutant harmonizes the NSR program for PM 2.5 with the NSR programs for those other criteria pollutants. This enables a source to determine the NSR impacts of proposed modifications by reference to a single signifi cant emissions rate for each pollutant, and enables streamlining of determinations rega rding the applicable control technology and analysis of air quality impacts into a singl e and comprehensive decision making process for both PM 2.5 and other criteria pollu tants that also cover PM 2.5 precursors. This also follows precedent. When ozone became a criteria pollutant, EPA used the NO X significant emissions rate from the NO 2 program. The burden imposed is not the only factor to consider when setting the significant emission rates for precursors – the process for determining the signi ficant emission rates 48must also take into account the accuracy and certainty with which we can predict the effect of the precursors on PM 2.5 concentrations. It is difficult to determine the ambient air quality effects that result from a single source of emissions of PM 2.5 precursors. There are conservative screening models for predicting impacts of large NO X and SO 2 sources on ambient PM 2.5 concentrations. We conducted a range of modeling analyses to determine the amount of PM 2.5 precursor emissions needed to show an increase in ambient PM 2.5 concentrations. These analyses show ed that precursor emissions probably have some localized impacts, but that most impact is farther downwind as precursors have the time to convert to PM 2.5 . In addition, the modeling available at this time does not provide sufficient information to estimat e impacts of emissions from individual sources of ammonia and VOC on ambient PM 2.5 concentrations. While we know that precursors contribute to the formation of PM 2.5 in the ambient air, the degree to which these individual precursors contribute to PM 2.5 formation in a given location is complex and variable. There are competing chemical reactions taking place in the atmosphere, and meteorological conditions play a significant role in the size and characteristics of particle formation. For these reasons, we do not believe that we ha ve adequate data on the impacts of precursor emissions from indi vidual sources to override the administrative advantages of setting the signi ficant emissions rates for SO 2 , NO X , and VOC for purposes of the PM 2.5 NSR program at the same levels that are already used for other purposes in the major NSR program.
E. Condensable PM Emissions In this final NSR rule, EPA will not require that States address condensable PM in establishing enforceable emissions limits for either PM 10 or PM 2.5 in NSR permits until 49the completion of a transition period, as de scribed herein. In response to significant comments on the variability of test met hods available for measuring condensable emissions, we have adopted this transition pe riod approach to allow us to assess the capabilities of the test methods and possibly revise them to improve performance. The transition period will end January 1, 2011 unl ess EPA advances this date through the rulemaking process described below. Subsequent to the completion of the test methods assessment, EPA will be conducting a notice and comment rulemaking to codify new or revised test methods. Once these new or revised test methods are in place, States will have the tools necessary to issue NSR permits addressing condensable PM. Thus, as part of the test methods rulemaking, we will take comment on an earlier closing date for the transition period in the NSR program if we are on track to meet our expectation to complete the test methods rule much earlier than January 1, 2011. In the meantime, however, we are establishing January 1, 2011 as the latest possible end date for the NSR transition period because this is also the end of the transition period for SI P purposes as described in the Clean Air Fine Particle Implementation Rule ( see section II.L in 72 FR 20586, April 25, 2007). Prevention of Significant Deterioration and NA NSR permits issued after the effective date of this NSR implementation rule but prio r to the end of the tr ansition period for the NSR program are not required to acc ount for condensable emissions in PM 2.5 or PM 10 emissions limits. After January 1, 2011 (or a ny earlier date estab lished in the upcoming rulemaking codifying test methods), EPA will re quire that NSR permits include limits of condensable emissions, as appropriate. Prior to this date, States ar e not prohibited from establishing emissions limits in NSR permits that include the condensable fraction of 50direct PM 2.5 . As noted in the proposal preamble, certa in commercial or industrial activities involving high temperature processes (e.g., fuel combustion, metal processing, and process cooking operations) emit gaseous polluta nts into the ambient air, some of which rapidly condense into partic le form. The constituents of these condensed particles include, but are not limited to, organic materi als, sulfuric acid, and metals and metal compounds. We consider such condensable em issions to be a com ponent of direct PM emissions. Specifically, direct PM emissions consist of both the “filterable fraction” which already exist in particle form at the elevated temperature of the exhaust stream, and the “condensable fraction” which exist in gaseous form under exhaust stream conditions but condenses rapidly in the ambient air. Because condensable PM emissions exist almost entirely in the 2.5 micrometer range and smaller, these emissions ar e inherently more significant for PM 2.5 than for prior PM standards addressing larger particles. Condensable PM emissions commonly make up a significant com ponent of direct PM 2.5 emissions. Therefore, we believe that it is important that the air quality management of PM promote a comprehensive approach to the control of condensable PM. We proposed on November 1, 2005 to clarify that condensable PM emissions must be included when determining whethe r a source is subject to the major NSR program. We noted in the pr oposal that our prior guidance 12 had clarified that PM 10

12 Letter from Thompson G. Pace, Acti ng Chief, Particulate Matter Programs Branch, to Sean Fitzsimmons, Iowa Depart ment of Natural Resources, (Mar. 31, 1994) (available at http://www.epa.gov/Region7/programs /artd/air/nsr.nsrmemos/cpm.pdf and in the docket for this rulemaking, Docket ID No. EPA-HQ-OAR-2003-0062) 51includes condensable PM and that, where States expect condensable PM emissions to be in higher amounts, States should use methods that appropriately measure condensable PM emissions. In addition, we pointed out that the 2001 consolidated emissions reporting rule (CERR) requires States to re port condensable emissi ons in each inventory revision ( see 67 FR 39602, June 10, 2001) and that Method 202 in appendix M of 40 CFR part 51 quantifies condensable PM. We also noted that States ha ve not applied this existing guidance consistently. We received a number of comments on whether NSR programs should account for condensable PM emissions in light of the current state of knowledge of and uncertainties around the measurement of direct PM 2.5 . Several commenters supported our proposal to require the inclus ion of condensable PM emi ssions in NSR applicability determinations. On the other hand, severa l other commenters expressed opposition to including condensables at this time and raised concerns about the availability and implementation of test methods and related issu es about the uncertainties in existing data for condensable PM 2.5 . As a result of the concerns, these commenters believed EPA would be premature in requiring a comp rehensive evaluation of condensable PM 2.5 , especially as it related to de veloping any new emissions limits for stationary sources. One commenter noted that re gulation of condensable PM at this time will impede, rather than facilitate, expeditious attainment of the PM 2.5 standard. Another commenter expressed concern about the potential for retroactive enforcement over applicability decisions made in good faith, and for retroac tive application of the new test method to assert violations of an emission limit, wher e the applicability decision or the emission limit was originally based on flawed testing/estimating methodology. Several 52commenters raised serious con cerns about the availability and implementation of accurate test methods and emissions factors for condensable PM 2.5 . They further stated that regulation of condensable PM 2.5 emissions would be appropr iate only after we have developed a workable transitional strategy that ensures existing major sources are not placed in “NSR jeopardy” for physical and operational changes undertaken before new test methods and other requirements for condensable PM 2.5 are established. In recognition of these concerns, both as they apply to the NSR program and the broader air program, we have adopted a tran sition period during which NSR permits need not address limits of condensable PM 2.5 emissions. During this transition period, EPA will undertake a collaborative testing effort with industry, National Association of Clean Air Agencies (NACAA), and other stakeholde rs to assess and improve the effectiveness and accuracy of the available or revised test methods. The purpose of the stakeholder testing projects will be to collect new direct filterabl e and condensable PM 2.5 emissions data using methodologies that provide data more representa tive of sources’ direct PM 2.5 emissions. The EPA, States, and others will use these data to establish or improve emissions factors and to define more repres entative source emissions limits in permits. The EPA acknowledges the legitimate con cerns raised by commenters concerning potential exposure to retroactive enforcement and has established rules to address this issue. The EPA will not revisit applicability determinations made in good faith prior to the end of the transition period, insofar as th e quantity of condensable PM emissions are concerned, unless the applicable implementati on plan clearly required consideration of condensable PM. Likewise, EPA will interp ret PM emissions limitations in existing permits or permits issued during the transi tion period as not requi ring quantification of 53condensable PM 2.5 for compliance purposes unless such a requirement was clearly specified in the permit conditions or th e applicable implementation plan. After the end of the transition period (January 1, 2011 or any earlier date established in the upcoming rulemaking codifyin g test methods), EPA will require that all NSR applicability determinations for PM 2.5 and PM 10 address condensable emissions as applicable, and the source may not rely on cal culations made for previous determinations that did not include an accurate accounting of condensables. Additionally, compliance with these limits must be determined using the promulgated validated test methods that are applicable after that date. Moreover, afte r that date, we expect that condensable PM emissions will be addressed in all other aspects of the major NSR program, such as impact analyses under PSD and offsets under NA NSR. See 72 FR 20586, April 25, 2007 for the discussion of the transition period as it applies to the other elements of the air program in the final Clean Air Fine Particle Implementation Rule. Although EPA is not requiring that Stat e NSR programs address condensable emissions of PM until the end of the transi tion period, States that have developed the necessary tools are not precluded from acting to measure and control condensable PM emissions in NSR permit actions prior to the e nd of the transition period, especially if it is required in an applicable SIP. To the exte nt that a State has th e supporting technical information and test methods, the State may assess the capabilities of current control technologies, possible modifications to su ch technologies, or new technologies as appropriate relative to c ontrol of condensable PM 2.5 emissions. As an example, a specific approach for controlling condensable PM coul d be a change in control device operating temperature to improve emissions reductions. We also note that it is important that 54implementation of any new or revised emissi ons limits and test methods that account for condensable emissions should be prospectiv e and clearly differentiated from existing NSR permit requirements. This will avoid c onfusion over the compliance status relative to existing PM emissions limits that were not developed considering the condensable portion. Notwithstanding the issues and uncertainties related to condensable PM, we encourage States to begin immediately to id entify measures for reducing condensable PM emissions in major NSR permit actions, partic ularly where those emissions are expected to represent a significant portion of total PM emissions from a source.
F. Prevention of Significant Deteri oration (PSD) Program Requirements To receive a permit for a new major s ource or a major modification, sources subject to PSD must:

• Install Best Available Control Technology (BACT).

• Conduct air quality modeling to ensure that the project’s emissions will not cause or contribute to either –

- A violation of any NAAQS or maxi mum allowable pollutant increase (PSD

increment); or

- An adverse impact on any Class I ar ea “air quality related value” (AQRV).

• As required, comply with preconstruction monitoring requirements. This final action regarding each of these elements is discussed in the following sections.
1. How must BACT be implemented for PM 2.5 ? We are not making any change to ou r current regulations or policy for implementing BACT requirements at a major s ource that is subject to the requirements of 55the PSD program. Accordingly, if a new major source will emit, or have the potential to emit, a significant amount of a regulated NSR pollutant in an attainment area for that pollutant, the source must apply BACT for each emissions unit that emits the pollutant. In addition, if a physical or operational change at an existing major source will result in a significant emissions increase and a significant net emissions increase of a regulated NSR pollutant in an attainment area for that pol lutant, the source must apply BACT to each proposed emissions unit experiencing a net incr ease in emissions of that pollutant as a result of the physical or operational change in the unit. Under the PM 2.5 PSD program, these requirements will apply to direct PM 2.5 emissions; SO 2 emissions; NO X emissions, unless a State demonstrates that NO X is not a significant contributor to ambient PM 2.5 concentrations in that area; and to VOC if identified by a St ate as a precursor in the PM 2.5 attainment area where the source is located.
2. How does EPA plan to address PM 2.5 Increments, Significant Impact Levels (SILs), and Significant Monitoring Concentrations (SMCs)? On November 1, 2005, we proposed a rule to implement the PM 2.5 NAAQS, including proposed revisions to the NSR program (70 FR 65 984). In that proposal, we indicated our intent to propose a separate rule for developing PM 2.5 increments, SILs, and SMCs and sought comments on general appro aches for developing these values. We proposed PM 2.5 increments, SILs, and SMCs in a rule dated September 21, 2007. 72 FR 54112. We intend to address comments re ceived on these components of the PM 2.5 PSD program when we finalize that proposed rule.
3. What is the ambient air quality analysis requirement for PM 2.5 ? All sources subject to PSD review must perform an ambient air quality impact 56analysis to show that the emissions from the source will not cause or contribute to a PSD increment or NAAQS violation. See section 165(a)(3) of the CAA; 40 CFR 51.166(k) and 52.21(k). We did not propose, and our fina l rules do not contain, any changes to the regulations on air quality impact analyses for purposes of the PM 2.5 NSR program. Accordingly, sources will be required to perform this analysis for the PM 2.5 NAAQS and, when finalized, PM 2.5 increments. Such analyses must consider how a source, in combination with other sources in the ar ea, will impact air quality at existing PM 2.5 monitor locations, as well as at other lo cations that are appropriate for comparing predicted PM 2.5 concentrations to the NAAQS based on PM 2.5 monitor siting requirements and recommendations.
4. How must the PSD preconstruction mon itoring requirement be implemented for
PM 2.5 ? Sources subject to PSD are subject to preconstruction ambient air quality monitoring requirements. See sections 165(a)(7) and 165( e) of the Act and 40 CFR 51.166(m) and 52.21(m). The PSD permitting re quirements provide that continuous preconstruction ambient air quality monitori ng must be conducted for any criteria pollutant emitted in significant amounts. Under 40 CFR 51.166(i)(5 ) and 52.21(i)(5), the reviewing authority has the di scretion to exempt an appl icant from this monitoring requirement if:

• The maximum modeled concentration fo r the applicable averaging period caused by the proposed significant emi ssions increase (or net emissions increase) is less than the prescribed SMC; or

• The existing monitored ambient concentr ations are less than the prescribed 57SMC. A source may also use existing data as a surr ogate for preconstruction monitoring if the existing monitored data record is determined to be representative of the project’s location. We proposed five options for how to address preconstruction monitoring for
PM 2.5 . We are adopting a combination of opti ons 1 and 3 from the proposal, primarily because we believe that it reflects existing proc edures for other regulated NSR pollutants. The following sections summarize the major comments received on each option and explain why we are not a dopting particular options. Option 1 – Require preconstruction monitoring for all sources but exempt on a case-bycase basis Generally, commenters who supported option 1 believed the option gives regulatory agencies enough flex ibility to address sources with unique characteristics. One commentator stated that another benefit is that this option would avoid unnecessary installation of new PM 2.5 monitors and redundant preconstruction monitoring. Another commenter, however, believed option 1 to be overly burdensome until EPA develops an SMC. The commenter argued that for example, there are many upcoming PSD projects in their State, which w ould be located in extremely remote areas where there are no local or regional PM 2.5 emission sources, so there would be no need to collect such data for these areas. Add itionally, one group of commenters stated that option 1 appeared to be “streamlining” prec onstruction permit requirements, which is not the intention of the Act’s PSD provisions, a nd that EPA does not have the authority to exempt sources from the requirements of section 165(e)(2). 58We agree with the commenter that reco mmended combining option 3 (the use of a
24-hr PM 2.5 SMC) with option 1 and ar e finalizing this approach. We have proposed an SMC for PM 2.5 in the rulemaking on increments, SILs, and SMCs (72 FR 54112, September 21, 2007). Our regulations at 40 CFR 51.166(i)(5) and 52.21(i)(5) have allowed the use of an SMC as screening tool for identifying when an impact is de minimis and there is thus little or no value in gathering preconstruction monitoring data The use of de minimis levels of this nature (such as significant emission rates and significant impact levels) is supported by c ourt precedent interpreting the NSR provisions of the Act. Alabama Power Co. v. Costle, 636 F.2d 323, 360 (D.C. Cir. 1979). (“Unless Congress has been extraordinarily rigid, there is likely a basis for an implication of de minimis authority to provide [an] exemption when the burdens of regulation yield a gain of trivial or no value.”) Option 2 – Exempt all sources from preconstruction monitoring Under option 2, we proposed to exempt all PM 2.5 sources from preconstruction monitoring through a blanket dete rmination that the existing PM 2.5 monitoring network is sufficient. One commenter who preferred opt ion 5 (described subsequently) was also supportive of option 2. This commenter no ted that preconstruction monitoring is expensive and can significantly delay a project. The commenter also pointed out that it is very difficult to locate monitors for both direct PM 2.5 and precursors because precursors may transport over long distances before transforming into PM 2.5 . The commenter indicated that we should not rely on the ex isting regulations, which are already known to be problematic. One comment letter from a group of e nvironmental advocacy organizations 59specifically opposed option 2. These commente rs noted that spatial gradients can be significant for PM 2.5 , especially for direct PM 2.5 emissions, and that the existing monitoring network is severely limited in its spatial coverage, most especially in attainment areas where PSD preconstructi on monitoring requirements apply. The commenters indicated that to make a blanke t determination that the existing network suffices for any source, regardless of where it might choose to locate, would be absurd. We decided not to finalize option 2 becau se we do not believe that the current network will be sufficient for all existing a nd potential new sources. As stated in the proposal preamble, we believe that the existing PM 2.5 monitoring record has the following limitations:

• The PM 2.5 monitoring data record would requ ire spatial interpolation between monitors for the determination of appropr iate concentrations at the project’s location.

• Use of existing monitored data will not increase the PM 2.5 monitoring data record to confirm or contra dict conventional perceptions.

• The PM 2.5 monitoring data record assumes that local hot spots of high PM 2.5 concentrations do not exis t or are already being m onitored, which may not be true in all cases.

• Automatic acceptance of existing measur ements does not follow our current policy that a case-by-case determinati on needs to be made to determine whether preconstruction ambien t monitoring is necessary.

• When used with the impact modeling, se parate concentratio ns of direct and precursor-formed PM are needed. 60Option 3 – Use SMC’s to exempt sources from preconstruction monitoring Several commenters supported this opti on adding that this approach follows existing procedures to justif y the exclusion of preconstr uction monitoring requirements when source impacts are less than the SMC or when sufficient representative data exists. One group of commenters stated that EP A’s proposed options 1 and 3, which would allow case-by-case or de minimis exemptions from the moni toring requirements, are illconceived as a matter of public policy a nd contradict the Act’s PSD provisions. We agree with the commenters that support adopting option 3 because a combination of options 1 and 3 reflects ex isting procedures for other regulated NSR pollutants. As discussed previously, a de minimis exemption from monitoring requirements is supported by court precedent inte rpreting the PSD provisions of the Act. We do not consider it sound policy to require gathering additional data when it is unnecessary to demonstrate that a proposed source or modification will not adversely impact air quality. Option 4 – Use existing PM 10 data We proposed using the available large PM 10 data record combined with the recently acquired PM 2.5 data to provide representative ambient measurements for most sources. One comment letter from an industry group opposed any requirement for preconstruction monitoring, and endorsed option 4 if nationally gathered PM 2.5 data is not available. Three commenters specifically opposed option 4. One co mment letter from an environmental advocacy organization stated th at option 4 is illega l on its face, to the extent that EPA intends it as a universally available alternative. This comment indicated that some individual sources might be able to demonstrate that PM 10 monitoring could 61fulfill the statutory requirements and purposes of PM 2.5 monitoring (e.g., with sufficiently protective assumptions about PM 2.5 /PM 10 proportions), but due to the variability in the relationship between PM 2.5 and PM 10 , EPA cannot categorically al low this substitution. Two other commenters stated that option 4 was not a vi able approach due to the convoluted nature of attempting to infer PM 2.5 concentration from PM 10 monitoring data for source-specific applications. We decided not to finalize option 4. As we recognized in the proposal preamble, the differences in characteristics between PM 2.5 and PM 10 and our limited understanding of their relationship are problematic for th is application. We do not believe that generalized factors to convert PM 10 concentrations to PM 2.5 concentrations sufficiently reflect important industry- specific and spatially-related characteristics of PM 2.5 . In addition, removing altogether the oblig ation to provide preconstruction PM 2.5 ambient monitoring data would eliminate in dustry’s contribution to the PM 2.5 data record when source impacts are more than de minimis

. Option 5 – Exempt sources from preconstruc tion monitoring if no SMC is established We noted in the proposed rule th at the existing regul ations at 40 CFR 51.166(i)(5)(iii) and 52.21(i)(5)(ii ) could be interpreted to allow a reviewing authority to exempt an applicant from preconstruction monitoring for any pollutant for which we have not established an SMC. These provisions state that a source may be exempted from preconstruction monitoring “if ... the pollutant is not listed in” the list of pollutants for

62which SMC have been set. 13 The original rationale for this exemption is based on the lack of adequate methods for measuring ambi ent concentrations of pollutants not on the list. See 45 FR 52709, 52723-52724. We requested co mment on this interpretation and any other legal or policy rationale that could support applying the text of these provisions to exempt sources from preconstruction monito ring if we elected not to define an SMC for PM 2.5 . One commenter stated that option 5 is th e most practicable to implement until an SMC can be established and any potential gaps in the monitoring netw ork can be filled. Two commenters question the legality of option 5 under the Act. They added that whatever may have been the case when the existing list of SMCs was adopted, methods now exist for conducting the monitoring requ ired under section 165(e )(2). We decided not to finalize option 5, and have proposed an SMC rule for PM 2.5 . In conclusion, we are finalizing a comb ination of options 1 and 3 from the proposal, since we believe that it reflects existing procedur es for other regulated NSR pollutants. Once we finalize an SMC for PM 2.5 , the reviewing authority will have the discretion to exempt a source from the pr econstruction monitoring requirement if the projected PM 2.5 ambient impact of the source is below the PM 2.5 level promulgated in our rules. In addition, additiona l preconstruction monitoring data may not be necessary based on the availability of existing representative monitoring data in the area, as discussed

13 These sections actually cross-referen ce the list at 40 CFR 51.166(i)(8)(i) and 52.21(i)(8)(i), however we renumbered those para graphs to paragraph (i)(5)(i) of those provisions in the December 31, 2002 NSR reform rule and inadvertently overlooked correcting the cross-references in paragr aphs (i)(5)(ii) and (i)(5)(iii). See 67 FR 80186. As proposed, in this final action we have corr ected this misnumbering and others in this section.
63previously.
G. Nonattainment New Source Re view (NA NSR) Requirements To receive a permit for a new major s ource or a major modification, sources subject to NA NSR must:

• Install Lowest Achievable Emission Rate (LAER) control technology;

• Offset new emissions with cr editable emissions reductions;

• Certify that all major sources owned or operated by the applicant in the same State are in compliance; and

• Conduct an alternative siting analysis de monstrating that the benefits of the proposed source significantly outweigh the environmen tal and social costs. We did not propose, nor are we finalizing, any revisions to the first, third, and fourth of these requirements. Thus, these re quirements apply for purposes of PM 2.5 and its designated precursors just as they apply for other criteria pollutant s and their designated precursors. In the remainder of this secti on G, we discuss our final actions related to offsets for direct PM 2.5 emissions and emissions of PM 2.5 precursors. 1. What is the required offset ratio for direct PM 2.5 emissions? Under section 173 of the Act, all majo r sources and major modifications at existing major sources within a nonattainment area must obtain emissions reductions to offset any emissions increases resulting from the project in an amount that is at least equal to the emissions increase, and that is consistent with reasonable further progress towards attainment. We refer to the propor tional difference between the amount of the required offsets to the amount of emissi ons increase as the “offset ratio.” The Act specifies an offset ratio for se veral situations. In ozone nonattainment 64areas subject to subpart 2 (of title I, part D of the Act), the ratio is set between 1.1:1 and 1.5:1 depending on the area’s level of classi fication pursuant to subpart 2. For other nonattainment areas, the Act esta blishes a minimum offset ratio of 1:1 pursuant to subpart 1 of title I, part D of the Act. As proposed, we are finalizing th e offset ratio for direct PM 2.5 emissions as at least 1:1 on a mass basis because the PM 2.5 program is being implemented under subpart 1 of the Act. The commenters on this issue generally agreed that our regulations should require an offset ratio of at le ast 1:1 pursuant to subpart 1. A few commenters indicated that a lowe r ratio could be acceptable on a sourcespecific basis if accompanied by a modeling analysis demonstrati ng a net air quality benefit. One commenter suggested that such a demonstration would be possible when a direct PM 2.5 emissions increase from a tall st ack is being offset by ground-level PM 2.5 emission reductions. Applying diesel retrof it technology to bus and truck fleets is an example of how ground-level PM 2.5 emission reductions could be achieved. We do not believe that a lower offset ratio is authorized under subpart 1, which prescribes an offset ratio of at least 1:1, and theref ore we have not adopted this approach in our final rules. Some of the commenters disagreed regardi ng whether an offset ratio of at least
1:1 under subpart 1 represents a ceiling or a floor on the level we can prescribe in our regulations. We interpret se ction 173 of the Act to allow higher offset ratios where necessary to achieve reasonabl e further progress. Accordingly, we believe that States may establish higher offset ratios in their State programs if they wish, but we do not believe that it would be appropr iate for us to do so for PM 2.5 in national regulations. We do not have cause to believe a higher ratio is necessary for PM 2.5 in each area of the 65country and prefer to leave this to the disc retion of States. We do not believe that the higher offset ratios required for ozone pr ecursors under subpart 2 apply in any way to direct PM 2.5 emissions or PM 2.5 precursors. 2. Which precursors are subject to the offset requirement? Consistent with our proposal, the pollutants that are designated as PM 2.5 precursors in a particular area are subject to the offset requirement in that area. Accordingly, SO 2 is subject to offsets in all PM 2.5 nonattainment areas. As a “presumedin” precursor, NO X will be subject to offsets unless a State obtains an exemption for its NSR program through a demonstration that NO X emissions in a particular area are not a significant contribu tor to that area’s ambient PM 2.5 concentrations. As “presumed-out” precursors, VOC and ammonia wo uld be subject to offsets only in areas where the State has demonstrated that these emissions are signi ficant contributors to the area’s ambient
PM 2.5 concentrations. Two commenters on this issue agreed with this approach; one commenter recommended that we not require offsets for any PM 2.5 precursors. We believe that it is appropriate to offset emissi ons increases of all precu rsors that have been established to contribute to the PM 2.5 nonattainment problem in a particular area.
3. What is the required offset ratio for PM 2.5 precursors? As discussed previously, the Act requ ires that a source obtain offsets for emissions increases that occur in a nonattainment area. As with PM 2.5 direct emissions, the minimum offset ratio permitted under subpart 1 of the Act is at least 1:1. Based on these requirements of the Act, we are finalizing our proposal that an offset ratio of at least
1:1 applies where a source seeks to offs et an increase in emissions of a PM 2.5 precursor with creditable reductio ns of the same precursor. This offset ratio applies for all
66pollutants that have been designated as PM 2.5 precursors in a particular nonattainment

area. Most commenters agreed with this approac h. A few commenters indicated that an offset ratio of less than 1:1 for precursor emissions of PM 2.5 should be allowed only if there is a net air quality benefit and if the lower ratio is justifie d by air quality modeling analysis. They noted that for PM 2.5 precursors, chemical reactivity modeling demonstrations should be developed and appr oved that are, at a minimum, capable of determining the impacts of the precursor emi ssions on the air quality in the nonattainment area in which the source is located. As not ed previously, we do not believe that any offset ratio less than 1:1 is permissible under subpart 1. One commenter stated that consistent with the statutory scheme for ozone laid out in section 182, and given the severity of the health risks associated with PM 2.5 , EPA must require offsets of at least 1.15:1 for PM 2.5 precursors in “moderate” nonattainment areas, and must increase the offset ratio in “serious” nonattainment areas or in areas that request extensions of their attainment deadlines. As mentioned previously, we do not believe that subpart 2 of the Act (which includ es section 182) has any relevance to PM 2.5 or its precursors. Subpart 2 is specific to ozone . In addition, we are implementing the PM 2.5 program under subpart 1. Nevertheless, unde r the Act, we believe that a State may require higher offset ratios if it determines that they are necessary to achieve reasonable further progress. For the reasons discusse d previously with respect to direct PM 2.5 , we do not believe that it is appropriate for us to set higher offset ratios for PM 2.5 precursors on a national basis. Two commenters requested that we make clear in the final rule that an increase in
67precursor emissions need only be offset once, even if the increase triggers nonattainment NSR under, for example, both the ozone and PM 2.5 programs. We agree with these commenters and are clarifying that a precursor emissions increase only needs to be offset once. A permit applicant will not, for example, need to obtain two sets of offsets for
NO X emissions if NO X is regulated as a precursor both for ozone and PM 2.5 in the area. The NO X precursor emissions need only be offset once in accordance with the applicable ratio. To the extent a higher ratio applies for ozone under subpart 2, the applicant would have to obtain offsets at the higher ratio. Ho wever, when the offset ratios are the same, both requirements can be met with a single set of NO X offsets.
4. Is interpollutant trading allowable to comply with offset requirements? In this final rule, we are allowing limite d interpollutant trad ing for purposes of offsets only (and not netting) under the PM 2.5 NA NSR program. Specifically, the final rules allow interpollutant trading only based on a trading ratio established in the SIP as part of the attainment demonstration appr oved for a specific nonattainment area, on a statewide basis, or in a regional, multi-state program. This differs from our proposal in that the final rules do not allow interpollutant trading on a case-by-case basis as part of an individual NA NSR permitting process. For the purpose of offsets in the NA NSR program for PM 2.5 , the final rules allow reductions in direct PM 2.5 emissions to offset precursor emissions increases, emissions reduc tions of one precursor to offset emissions increases of another precursor, and reductions in precursor emissions to offset direct
PM 2.5 emissions increases. We have completed a technical assessment to develop preferred interpollutant trading ratios that may be used for the purposes of PM 2.5 offsets, where appropriate. The 68preferred ratios were generated with a PM 2.5 response surface modeling (RSM) approach based on the EPA’s Community Multi-Scale Air Quality (CMAQ) model. This RSM approach allows one to distinguish the imp act of direct and precursor emissions from particular source gr oupings on total PM 2.5 concentrations within ni ne specific urban areas and broadly across U.S. regions. This appr oach was recently applied by the Agency to inform development of potential PM 2.5 control strategies as part of the Regulatory Impact Assessment (RIA) for the final PM 2.5 NAAQS. 14 Based on results from the RSM, we determined the distribution of predicted ra tios for urban areas and regions across the country and developed the prefer red ratios with a goal to be environmentally protective. The technical approach with details on data and modeling in puts are fully described in a technical memo to the docket, “Details on Technical Assessment to Develop Interpollutant Trading Ratios for PM 2.5 Offsets.” 15 Use of the preferred ratios is recommended by EPA but not mandatory, a nd we do not intend to preclude the opportunity for a local demonstration of tradi ng ratios on a case-by-case basis and public input into that process. Our work here and in other recent PM 2.5 assessments clearly show that the relative efficacy of emissions reductions varies acros s pollutants and that a ton of direct PM 2.5 is generally more effective than a ton of precursor emissions in reducing overall PM 2.5 concentrations. For the purposes of reporting information here, we define the “East” to be the 37 States either completely or in pa rt east of 100 degrees west longitude. “West”

14 A full description of this approach is available in the technical support document at http://www.epa.gov/scram001/reports/pmnaaqs_tsd_rsm_all_021606.pdf and in the docket for this rulema king, Docket ID No. EPA-HQ-OAR-2003-0062. 15 Available in the docket for this rulemaking, Docket ID No. EPA-HQ-OAR2003-0062. 69would include the remaining 11 western-most St ates in the continental United States. We found the following relationships between pollu tants in developing the preferred trading ratios:
1. NO X to SO 2 ; SO 2 to NO X : Our assessment indicated potential disbenefits of reducing NO X (i.e., reducing NO X tons in urban areas may increase overall
PM 2.5 concentrations) in the eastern Un ited States and urban areas in the western United States. Due to the possi bility of these disb enefits and the high degree of variability in the observed NO X to SO 2 ratios or SO 2 to NO X ratios across urban areas, we are not defini ng preferred ratios involving trades between these precursors but will rely upon a local demonstration to determine the appropriate trading ratios.
2. NO X to Primary PM 2.5 ; Primary PM 2.5 to NO X : Based on a local demonstration that NO X reductions are benefi cial in reducing PM 2.5 concentrations (i.e., no disbenefits from NO X reductions as noted previous ly), our assessment indicates that the preferred tradin g ratio is 200 to 1 (NO X tons for PM 2.5 tons) or 1 to 200 (PM 2.5 tons for NO X tons) for areas in the easte rn United States, and 100 to 1 (NO X tons for PM 2.5 tons) or 1 to 100 (PM 2.5 tons for NO X tons ) for areas in the western United States.
3. SO 2 to Primary PM 2.5 ; Primary PM 2.5 to SO 2 : We have determined a nationwide preferred ratio of 40 to 1 (SO 2 tons for PM 2.5 tons) or 1 to 40 (PM 2.5 tons for SO 2 ) for trades between these pollutant s. We recognize there is spatial variability here between urban and regionally located sources of these

70pollutants that can be addr essed through a local demons tration to determine an area-specific relationshi p, as appropriate. We recommend that States use these hi erarchies and trading ratios in their interpollutant trading programs to provide c onsistency and streamline the trading process. As indicated by our work and findings, it is appropriate to establish acceptable trading ratios for interpollutant trading for PM 2.5 NSR offsets. If States elect to use EPA’s recommended trading ratios, they may rely on EPA’s technical work and a presumption that such ratios will be approvable by EPA absent a credible showing that EPA’s trading ratios are not appropriate fo r that location. If States choose to develop their own hierarchies/trading ratios, they will have to substantiate by modeling and/or other technical demonstrations of the net air quality benefit for PM 2.5 ambient concentrations, and such a trading program will have to be approved by EPA. We acknowledge that the relationship between pollutants can vary across geographic areas. Thus, local demonstrations, to determine trading ratios, will need to address a number of local factors in cluding, but not limited to, the following:
1. The relative magnitude of emissions of direct PM 2.5 and precursor gases (e.g.,
SO 2 and NO X ) within the geographic area of interest.
2. The relative contribution to local PM 2.5 nonattainment of directly emitted
PM 2.5 and individual precursors from the various sources or source categories under consideration as part of a potential interpollutant trade.
3. The meteorological conditions and t opography of the area, which result in different source-receptor relationships acr oss pollutants within the local area. We have adopted this approach to ca pture the flexibility advantages of 71interpollutant trading, while remaining mindful of the li mitations of exis ting air quality models. We believe that the regional-scal e models used for area-wide attainment demonstrations have sufficient accuracy to establish an overall equivalence ratio for a nonattainment area. However, we do not beli eve that available m odels can accurately determine the effects of interpollutant trades at a single source. In addition, permit-bypermit modeling demonstrations are extremel y resource intensive, only to yield limited results. For these reasons, the final ru les only allow a State to develop its own interpollutant trading rule for inclusion in its SIP, based on a tec hnical demonstration for a specific nonattainment area. We will not accept case-by-case demonstrations on an individual source permit basis. The flexibility provided by this policy allo ws sources to select the most costeffective manner to obtain the offsets necessary to ensure that PM 2.5 air quality improves. This will be particularly beneficial where offs ets for one particular pollutant are scarce in a particular area, as is often the case for direct PM 2.5 emissions and SO 2 . We received a large number of comments on this issue representing a wide variety of viewpoints. Several commenters supported flexible interp ollutant trading at ratios established either on an area-wide basis or permit by permit. They often pointed out the economic and administrative benefits of flexibility in the program, especially in areas where offsets for some pollutants will be difficult to obtain. One commenter asserted that such flexibility is essential to the ability of en terprises to be able to expand as the PM 2.5 NAAQS is implemented, especially in the program’s early years. Another commenter suggested allowing such trading on an equal basis, without the “unnecessary complication” of interpollutant offset ratios. 72Many commenters argued against allowing in terpollutant trading for offsets. These commenters commonly pointed out that direct PM 2.5 emissions typically have a more local impact, while the impact of precur sor emissions are farther afield. A number of commenters pointed out the complex atmo spheric chemistry of secondary particulate formation and the shortcomings of the air qual ity models currently available to perform a detailed PM 2.5 formation assessment, specifically that local-scale models are not sufficiently accurate and regional-scale models do not have the resolution to show local impacts adequately. According to two co mmenters, trading precu rsors for direct PM 2.5 emissions raises serious environmental justic e concerns due to the localized impacts of direct PM 2.5 emissions. These commenters also asserted that the equivalence between precursors would vary spatially and tempora lly, making it extremely difficult to assess, and that PM 2.5 precursors also differ in their impact s on other air pollution problems, such as direct health and welfare impacts of SO 2 and NO X ; and formation of ozone, acid deposition, and reactive n itrogen deposition. We also received comments opposing allowi ng interpollutant tr ading for netting purposes, on the basis that the resulting program would be very staff-intensive apart from the difficulty of demonstrating through modeling the net air quality benefit of a single source trade. We concur with these comm enters and are not allowing interpollutant trading for netting purpo ses at this time. A number of commenters supported some t ypes of trades, but not others. Most frequently, these commenters favored allowing reductions in direct PM 2.5 emissions to offset precursor emissions increases. One commenter suggested a hierarchy as follows: direct PM 2.5 emissions, SO 2 , NO X , ammonia, and VOC. That is, a pollutant should be 73allowed as an offset for a pollutant ranked lo wer, but not the revers e (e.g., reductions in direct PM 2.5 emissions could be used to offset in creases in any of th e listed pollutants,
SO 2 emissions reductions could offset NO X increases, etc.). As previously noted, this rule allows inte rpollutant and interp recursor trading of offsets according to a SIP-approved trading program. To be approved, the trading program must either adopt EPA’s recomme nded trading ratios or be backed up by regional-scale modeling that demonstrates a net air quality benefit using appropriate overall offset ratios for such trades for a specified nonattainment area, State, or multiState region. There is consid erable uncertainty about the relationship of precursor and direct PM 2.5 emissions to localized ambient PM 2.5 concentration both spatially and temporally. Given the uncertainty as to localiz ed adverse and benefici al effects, we have opted for program flexibility. We believe th is is necessary, in part, because of the shortage of available offsets for some pollutants, particularly direct PM 2.5 emissions and
SO 2 , in many areas.
H. How will the transition to the PM 2.5 PSD requirements occur?
1. Background On October 23, 1997, after the NAAQS for PM 2.5 was originally promulgated, we issued a guidance document entitled “Interim Implementation for the New Source Review Requirements for PM 2.5 ,” John S. Seitz, EPA. As no ted in that guidance, section 165 of the Act suggests that PSD requireme nts become effective for a new NAAQS upon the effective date of the NAAQS. Section 165 (a)(1) of the Act provides that no new or modified major source may be constructed w ithout a PSD permit that meets all of the section 165(a) requirements with respect to the regulated poll utant. Moreover, 74section 165(a)(3) provides that the emissions from any such source may not cause or contribute to a violation of any NAAQS. Also, section 165 (a)(4) requires BACT for each pollutant subject to PSD regulation. The 1997 guidance stated that sources shoul d continue to use implementation of a
PM 10 program as a surrogate for meeting PM 2.5 NSR requirements until certain difficulties were resolved, primarily the lack of necessary tools to calculate the emissions of PM 2.5 and related precursors, th e lack of adequate modeli ng techniques to project ambient impacts, and the lack of PM 2.5 monitoring sites. With this final action and technical developments in the interim, these difficulties have largely been resolved.
2. Transition for “Delegated States” The Federal PSD program is contained in 40 CFR 52.21. This section is the Federal implementation plan for areas lacki ng an approved PSD program. We implement this program in Indian country and some U.S. territories, bu t for the most part we have delegated implementation of 40 CFR 52.21 to those States without approved PSD programs (typically referred to as “delegated States”). Except as provided in the grandfathering provisions that follow, these final rules go into e ffect and must be implemented beginning on the effective date of this rule, [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER] in all areas subject to 40 CFR 52.21, incl uding the delegated States. Consistent with 40 CFR 52.21(i)(1)(x), wherein EPA grandfathered sources or modifications with pending permit applications based on PM from the PM 10 requirements established in 1987, EPA will allow sources or modifications who previously submitted applications in accordance with the PM 10 surrogate policy to remain subject to that policy 75for purposes of permitting if EPA or its delegate reviewing authority subsequently determines the application was complete as submitted. This is contingent upon the completed permit application being consistent with the requirements pursuant to the EPA memorandum entitled “Interim Implementati on of New Source Review Requirements for
PM 2.5 ” (Oct. 23, 1997) recommending the use of PM 10 as a surrogate for PM 2.5. Accordingly, we have added 40 CFR 52.21(i) (1)(xi) to reflect this grandfathering provision.
3. Transition for “SIP-Approved States” The requirements for State PSD programs are contained in 40 CFR 51.166. Most States have developed PSD programs accordi ng to these requirements, which we have approved into each State’s implementation pl an. States with PSD programs approved under 40 CFR 51.166 are called “SIP-approved States.” States with SIP-approved PSD programs th at require amendments to incorporate these final NSR rule changes for PM 2.5 will need time to accomplish these SIP amendments. For example, a State may need to amend its existing regulations to add the specific significant emissions rate for PM 2.5 or a designated precurs or. In our December 31, 2002 Federal Register notice promulgating other changes to the NSR program, we explained that the Act does not specifically address the timeframe by which States must submit SIP revisions when we revise the PSD and NA NSR rules. We nonetheless looked to section 110(a)(1) to guide our deci sion to require States to adopt and submit plan revisions within 3 years from when we publish changes in the Federal Register . We codified this approach in th e PSD regulations at 40 CFR 51.1 66(a)(6)(i) and applied this same timeframe to State NA NSR programs th rough that final rule action. 64 FR 80241.
76This rule follows our established approach for determining when States must adopt and submit revised SIPs following changes to the NSR regulations, but does not revise otherwise applicable SIP submittal deadlines. Accordingly, we are requiring States with SIP-approved PSD programs to submit re vised PSD programs and revised NA NSR programs for PM 2.5 ( see section V.I.) within 3 years from the date of this action 16

. During this SIP development period, the PM 2.5 NAAQS must still be protected under the PSD program in such States. We ar e finalizing our proposed option 1 that if a SIP-approved State is unable to implement a PSD program for the PM 2.5 NAAQS based on these final rules, the State may continue to implement a PM 10 program as a surrogate to meet the PSD program requirements for PM 2.5 pursuant to the 1997 guidance mentioned previously. Under option 1 for SIP-approved States, we had proposed two additional requirements. These were to requ ire sources to demonstrate that emissions from construction or operation of the facility will not cause or contribute to a violation of the PM 2.5 NAAQS and to include condensable PM emissions in determining major NSR

16 In our proposal, we proposed April 5, 2008 as a deadline for States to comply with the revised nonattainment NSR and PSD requirements in this rule. However, in light of the time it has taken to complete this fina l rule, expecting States to submit required SIP revisions consistent with this final rule by April 5, 2008 is no longer practical or fair. Nevertheless, States are still currently required to implement a PSD program for PM 2.5 , and we still expect States to fulfill the SIP infrastructure requirements of CAA section 110(a)(2), including the PSD pr ogram requirements, by April 5, 2008. We believe these PSD program requirements are currently met by implementing the transitional PSD program for PM 2.5 described in this preamble (a.k.a. the PM 10 surrogate policy). In accordance with a Consent Decree in Envir onmental Defense and American Lung Ass'n v. Johnson , No. 1:05CV00493 (D.D.C. June 15, 2005), EPA must determine by October 5, 2008 whether each State has submitted the SIP revisions for the PM 2.5 PSD program required under section 110(a )(2) of the Act. This ru lemaking does not change the specific guidance we previously provided to States on what they should submit by April 5, 2008 to comply with section 110(a)(2).
77applicability and contro l requirements. We are not fina lizing either of these additional requirements of our proposed option 1. We have dropped the requirement for demonstrating compliance with the PM 2.5 NAAQS in order to maintain consistency in the application of the existing su rrogate policy across the PSD program during the interim period. Since in the final rule we are otherw ise allowing SIP-approved States to continue with the existing PM 10 surrogate policy to meet the PSD requirements for PM 2.5 , partially implementing the PM 10 surrogate policy in this manner would be confusing and difficult to administer. Thus, to ensure consistent administration during the transition period, we have elected to maintain our existing PM 10 surrogate policy which only recommends as an interim measure that sources and re viewing authorities conduct the modeling necessary to show that PM 10 emissions will not cause a violation of the PM 10 NAAQS as a surrogate for demonstrating compliance with the PM 2.5 NAAQS. Also as discussed previously in section V.E, we are not re quiring condensable em issions to be fully integrated into the PM 2.5 program until the end of the transition period to validate test methods discussed in section V.E of this preamble. In our proposal, we offered two additiona l options for the SIP development period in States with SIP-approved PSD programs. Under option 2, we would have updated the 1997 guidance to reflect the prov isions in these final rules and allowed States to run a
PM 2.5 program pursuant to this updated guida nce. Alternatively under option 2, we would have amended appendix S and 40 CFR 52.24 so that the PSD requirements of 40 CFR 52.21 would govern the issu ance of major NSR permits during the SIP development period. Finally, under option 3, we would have allowed a State to re quest delegation of just the Federal PM 2.5 PSD program in 40 CFR 52.21 in that State. A State that otherwise 78had a SIP-approved PSD program coul d have requested delegation for PM 2.5 by informing us that it did not in tend to submit a PSD SIP for PM 2.5 in the immediate future. We received several comments suppor ting option 1, although some of these commenters requested that we not require cond ensable emissions to be included until the concerns with test methods were resolved. One of these commenters favored continuing to implement the PM 10 program as a surrogate under th e 1997 guidance to provide clarity and certainty to the permitting agency and regulated community. The commenter indicated that PM 2.5 inventories and methods for estimating emission rates are rudimentary and may even be nonexistent in some cases, which would make permitting

onerous. A few commenters opposed option 1. One of these commenters indicated that we should not continue outdated policy (i.e., the 1997 NSR guidance) because it does not address the PM 2.5 problem, cannot be implemented in some States, and does not incorporate precursor emissions. Four commenters expressed support for opti on 2. Three of these suggested that we issue updated guidance to incor porate these PSD requirements for PM 2.5 , while one preferred that we revise a ppendix S to point to the re quirements of 40 CFR 52.21. We received one comment in favor of option 3 and three opposed. Two commenters supported approaches diffe rent from our options. One of these commenters requested that the interim framew ork should, at a minimum, ensure that any new or modified project that exceeds thresholds use BACT. The commenter also suggested that we require offsets for proj ects approved before the other protective elements of the full PSD program are in plac e to ensure that there is no significant 79deterioration in air quality. Another commenter stated that none of the proposed options were viable for their State. The commenter requested that we allow States to continue their existing PM 10 program as a surrogate for PM 2.5 , without caveat. As noted previously, we ar e finalizing proposed option 1, without the requirement of demonstrating compliance with the PM 2.5 NAAQS or the requirement to include condensable emissions. We believe that our final rule is reasonable for the following reasons. First, PM 10 will act as an ade quate surrogate for PM 2.5 in most respects, because all new major sources and major modifications that would trigger PSD requirements for
PM 2.5 would also trigger PM 10 requirements because PM 2.5 is a subset of PM 10 . Second, both of the precursors designated in the final rule – SO 2 and NO X (presumptively) – are already regulated under State NSR programs for other criteria pollutants. Thus, those precursors will be subject to NSR through thos e other programs. We do not believe that the other options or suggestions offer signifi cant advantages that out weigh the utility and ease of implementation of this approach. States may include grandfathering provisi ons similar to the ones EPA included in the transition requirements for 40 CFR 52.21.
I. How will the transition to the PM 2.5 NA NSR requirements occur?
1. Background The requirements for State NA NSR programs are contained in 40 CFR 51.165. All States with nonattainment areas have developed NA NSR programs according to these requirements, which we have approve d into each State’s implementation plan. However, as noted previously, it takes time for a State to amend its SIP when it must make changes to its NA NSR program. Accord ing to the provisions of 40 CFR 52.24(k), 80during such an interim period when a Stat e lacks an approved NA NSR program for a particular pollutant, appendix S of 40 CFR part 51 applies for NA NSR permitting. Section 172(c)(5) of the Act requires that States issue major NSR permits for construction and major modifications of majo r stationary sources in any nonattainment area. Thus, since the PM 2.5 nonattainment designations became effective on April 5, 2005, States are now required to issue major NSR permits that address the section 173 NA NSR requirements for PM 2.5 . On the date that the PM 2.5 nonattainment designations took effect (April 5, 2005), we issued guidance to address implemen tation of the NA NSR program pending the completion of this action to develop implementation rules for PM 2.5 . See memorandum from Stephen D. Page, Director, Office of Air Quality Planning and Standards to Regional Air Directors, “Implementation of New Source Review Requirements in PM 2.5 Nonattainment Areas” (April 5, 2005). Our current guidance permits States to implement a PM 10 NA NSR program as a surrogate to address the requi rements of NA NSR for the PM 2.5 NAAQS. A State's surrogate major NSR program in PM 2.5 nonattainment areas may consist of either the implementation of the State’s SIP-approved NA NSR program for PM 10 or implementation of a major NSR program for PM 10 under the authority in 40 CFR part 51, appendix S.
2. Transition With this finalization of the new PM 2.5 NSR implementation requirements under 40 CFR 51.165, States now have the necessary tools to implement a NA NSR program for PM 2.5 . After the effective date of the amended rule (that is, [INSERT DATE 60 81DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER] ), States will no longer be permitted to implement a NA NSR program for PM 10 as a surrogate for the PM 2.5 NA NSR requirements. Most States will then need to implement a transitional PM 2.5 NA NSR program under appendix S (as amended in this rulemaking action) until EPA approves changes to a Stat e's SIP-approved NA NSR program to reflect the new requirements under 40 CFR 51.165. At this time, we do not believe it is appropriate to allow grandf athering of pending permits being reviewed under the PM 10 surrogate program in nonattainment areas, main ly because of a State’s obligations to expedite attainment and the fact that we had not established a similar precedent for transitioning from PM to PM 10 . The NA NSR provisions in a State’s ex isting SIP-approved NA NSR program would also apply in areas desi gnated as nonattainment for the PM 2.5 NAAQS if the SIPapproved regulations contain a generic require ment to issue part D permits in areas designated as nonattainment for any criteria po llutant and do not otherwise need to be amended to incorporate the changes finalized in this action. States belonging to the following categories will need to revise their NA NSR regulations and submit them to

82EPA for incorporation into the SIP within 3 years from the date of this action 17 :

• States that have nonattainment regula tions which need to be amended to incorporate the new PM 2.5 requirements.

• States that have designat ed nonattainment areas for PM 2.5 and their nonattainment NSR regulations specifi cally list the areas in which NA NSR applies (i.e., the list does not include the designated nonattainment areas for
PM 2.5 ).

• States that have not previously ha d nonattainment areas but now have nonattainment areas for PM 2.5 . These States will have to implement a transitional NA NSR permitting program for PM 2.5 pursuant to 40 CFR 52.24(k) and appendix S until their existing part D SIPs are revised to meet these new PM 2.5 NSR requirements under 40 CFR 51.165.
3. Implementation of NSR Under the “Emissions Offset Interpretative Ruling” (40 CFR part 51, appendix S) with Revisions In general, appendix S requires new or m odified major sources to meet LAER and obtain sufficient offsetting emissions reductions to assure that a new major source or

17 As discussed earlier, we are following the precedent we es tablished in our 2002 rule for NA NSR program revisions to allo w States adequate time to adopt these revisions. For practical and fairness reas ons, we are not requiri ng the NA NSR elements of this rule to be submitted by April 5, 2008, as we had proposed. However, the States are still required to subm it nonattainment plans for PM 2.5 (including NA NSR programs) on April 5, 2008. We believe this requirement is satisfied by implementing the transitional NA NSR program for PM 2.5 (a.k.a. the PM 10 surrogate policy) described in our April 5, 2005 guidance, or, if submitted af ter the effective date of this rule, implementing Appendix S as revised in this rule. This rulemaking does not change the specific guidance we previously provided to States on what they should submit to EPA by April 5, 2008 to comply with nonattain ment area requirements under Part D.

83major modification of an existing major source will not interfere with the area’s progress toward attainment. Readers should refer to appendix S for a complete understanding of these and other appendix S requirements. In this action, we are finalizing our proposed revisions to appendix S to in clude provisions necessary to implement a transitional NA NSR program for PM 2.5 , including significant emissions rates applicable to major modifications for PM 2.5 and, as appropriate, precurso rs. Additionally, since we are finalizing interpollutant trad ing provisions in the NSR rules at 40 CFR 51.165, we are also amending appendix S to allow interpollutant trading for PM 2.5 . Appendix S applies directly to new and modified major stat ionary sources. In accordance with the requirements of section 110(a)(2)(c ) of the Act, we believe that the majority of States have the legal authority to issue permits consistent with these requirements under an existing SIP-approved permitting program. Nonetheless, at least one State has reported that it lacks the legal author ity to issue permits implementing the requirements of appendix S under its existing permitting rules. If a State is unable to apply the require ments of appendix S, we will act as the reviewing authority for the relevant portion of the permit. We believe that it is appropriate for EPA to issue the preconstr uction permits in such circumstances. Congress amended the Act in 1990 to remove the requirements that would have applied a construction ban in areas that lacked a SIP- approved part D permit program. Thus, we believe that it is consistent with Congressional intent that either the State or EPA issues construction permits for those projects meeti ng the applicable criteria during the interim period. See the preamble of the proposal for this rule for more detail on the legal basis for requiring States to i ssue NA NSR permits pursuant to appendix S during the SIP 84development period (70 FR 66045-46). We received three comments supporting the issuance of NA NSR permits under appendix S during the SIP development peri od. Two of these commenters expected States generally to be able to do so, while one suggested that EPA issue such permits because States will lack the au thority to do so without protracted rule revisions. One of these commenters also suggested that we revi se appendix S to authorize interprecursor trading during the transition period, believing that the pauc ity of existing direct PM 2.5 emissions and SO 2 offsets likely will make business expansion in PM 2.5 nonattainment areas from now until at least April 2008 impo ssible unless this is done. One commenter suggested that we suspend the 2005 PM 2.5 NSR guidance which allows use of PM 10 emissions as a surrogate for PM 2.5 emissions in PM 2.5 nonattainment areas when we adopt the final PM 2.5 implementation rules, while three other commenters requested continued implementation of that guid ance during the interim period. As noted previously, this final action w ill require States to amend their NA NSR programs consistent with the amended rules at 40 CFR 51.165. During the SIP development period, where they have legal au thority to do so, States must issue NA NSR permits under appendix S (as revised for purposes of the PM 2.5 program). To address one of the points raised by commenters, we are am ending appendix S to allow interpollutant trading for PM 2.5 in this final rule. Where a State de termines that it does not have legal authority to issue such permits, we will act as the reviewing authority. As of the effective date of this action, the 2005 PM 2.5 NSR guidance on use of PM 10 emissions as a surrogate for PM 2.5 emissions will remain in effect only for PSD in the SIP-approved States during the SIP development period. In the delegate d PSD States and in nonattainment areas, the 85new PM 2.5 requirements will apply immediately on the effective date of this final action.
J. Does major NSR apply to PM 2.5 precursors during the SIP development period? As discussed previously in section V.A, we have taken final action on NSR applicability for PM 2.5 precursors. Specifically, we have designated SO 2 as a national precursor to PM 2.5 in all areas, NO X as a “presumed-in” precursor in all areas, VOC as a “presumed-out” precursor in all areas, a nd ammonia as a “presumed-out” precursor. Thus, States have the option of excluding NO X as a precursor by demonstrating that NO X emissions are not a significant contributor to ambient PM 2.5 concentrations in a particular area. In addition, States have the opti on of identifying VOC and/or ammonia as precursor(s) by demonstrating that emissions of VOC and/or ammoni a are a significant contributor in an area, and thus should be subject to major NSR. In the proposal, during the SIP development period, we proposed that SO 2 should be treated as a regulated PM 2.5 precursor as of the effective date of this final rule since there is no doubt about its status as such in any area and proposed to defer NSR applicability for NO X until a State SIP submittal so that if a State elected to submit information to rebut the presumption that NO X is a regulated PM 2.5 precursor, the State would have an opportunity to do so in its SIP submittal. We also proposed that VOCs and ammonia would not be treated as PM 2.5 precursors during the interim period because they are presumed not to be precursors until th ey have been demonstrated to be through a State’s SIP submittal. A few commenters supported staying the applicability of NSR to all precursors during the interim period. However, two of these supporters suggested that EPA establish mechanisms for interpollutant trad ing for offsets during the interim period so 86that increases in direct PM 2.5 emissions can be offset with SO 2 or NO X emissions reductions. Another supporter noted that their State cannot impos e obligations on NSR applicants until those obligations are establishe d in State regulations or statutes. Another indicated that this delay would allow States the time to develop experience and knowledge in establishing local photochemical models and to performance test their
accuracy. Two commenters opposed staying NSR app licability for any pr ecursors. They believe that this would make attainment mo re difficult. One commenter suggested that
SO 2 should be designated as a precursor duri ng the interim period, a nd another suggested the same for SO 2 and NO X . Based on the comments, we have been persuaded that SIP-approved PSD States will not have the authority to regulate PM 2.5 precursors before they have amended their SIPs to incorporate these requi rements in attainment areas. Thus, in order to allow time for these States to revise their regulations to incorporate such requi rements, this final action does not requ ire regulation of SO 2 or NO X as precursors to PM 2.5 under PSD until the SIP development period ends. In addition, we are allowing SIP-approved PSD States to continue with the existing PM 10 surrogate policy to meet the PSD requirements for
PM 2.5. However, for delegated PSD States, SO 2 and NO X are regulated as precursors from the effective date of this rule. However, th ese States or EPA have the option of excluding
NO X as a precursor by demonstrating that NO X emissions are not a significant contributor to ambient PM 2.5 concentrations in a particular area. For nonattainment areas, the transitiona l program pursuant to appendix S will apply on the effective date of th is action. Under appendix S, SO 2 will be regulated as a 87precursor in all nonattainment areas for PM 2.5 . . However, unlike in the proposal, NO X will not be regulated as a precursor for PM 2.5 because we believe it is appropriate to give States the opportunity to determine whether NO X emissions are a significant contributor to the ambient PM 2.5 problem, and to make the appropria te demonstration in their SIP. Finally, for States determining that VOC and/or ammonia are PM 2.5 precursors under their SIPs, we will approve their definition of “significant emissions rate” for each precursor based on an appropr iate demonstration.
K. Are there any Tribal concerns? Some Tribal areas may be designated as nonattainment, in part because of pollution that is transported from surrounding State lands. Tribal representatives have advocated for additional flexibility to address nonattainment problems caused by transported pollution, such as a pool of availabl e NSR offset set-asides (which we expect would come from State offset pools or banks ), because they have limited ability to generate offsets on their own. Tribal representatives have ra ised these and other concerns in discussions on implementation of the 8-hour ozone and PM 2.5 standards, and in comments on the 8-hour ozone implementation rule. We requested comment on whether emissions offset set-asides, possibly gene rated by innovative measures to promote additional emissions reductions, are an appropriate method to help level the playing field for the Tribes and support economic development in Tribal areas. We also requested comment on ways in which States may help provide the Tribes access to offsets from non-Tribal areas. We received no comments on these issues. We recently proposed Tribal NSR rules. See 71 FR 48696, August 21, 2006. They include a NA NSR rule, which refers to appendix S for its substantive requirements, 88and a minor NSR rule. In recognition of the concerns mentioned above, we have proposed and sought comments on options for ob taining offset relief in that proposal. We will address these issues in the context of that rule.
L. What are the requireme nts for minor NSR for PM 2.5 ? Pursuant to section 110(a)(2)(C) of the Act, States must have a minor source permitting program. This applies to new and modified stationary sources that are not considered major for a criteria pollutants or a precursor for a criteria pollutant. Prior to this action, States were requi red to include the following pol lutants in their minor NSR
program:

• VOC,

• SO 2 ,

• NO X ,

• CO,

• PM 10 , and

• Lead (Pb). Based on this action, States must now am end their minor source programs to include direct PM 2.5 emissions and precursor emissions in the same manner as included for purposes of PM 2.5 major NSR.
M. Rural Transport Areas In the proposal for the Clean Air Fine Particle Implementation Rule and this NSR implementation rule for PM 2.5 , we considered the option of classifying some nonattainment areas as transport areas that suffer from overwhelming transport, and of developing NA NSR rules specific to such areas. However, the final implementation rule 89does not include the rural transport classifi cation. Consequently, no NA NSR rules have been developed or finalized in this rule.
VI. Statutory and Executive Order Reviews
A. Executive Order 12866: Regul atory Planning and Review Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a “significant regulatory action” because it is likely to raise novel legal or policy issues arising out of legal mandates, th e President’s priorities, or the principles set forth in the Executive Order. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under EO 12866 and any changes made in response to OMB recommendations have been documented in the docket for this action.
B. Paperwork Reduction Act The information collection requirements in this rule have been submitted for approval to the OMB under the Paperwork Reduction Act , 44 U.S.C. 3501 et seq . The information collection requirements are not enforceable until OMB approves them. The Information Collection Request (ICR) docum ent prepared by EPA has been assigned OMB Control Number 2060-0003 (EPA ICR No. 1230.21). To achieve the purposes of the major NSR program, certain records and reports are necessary for the State or local agency (or the EPA Administrator in non-delegated States), for example, to: (1) confirm the co mpliance of status of stationary sources, identify any stationary sources not subject to the rules, a nd identify stationary sources subject to the rules; and (2) ensure that th e stationary source control requirements are being achieved. The information would be us ed by EPA or State enforcement personnel to (1) identify stationary sources subject to the rules, (2) ensure that appropriate control 90technology is being properly app lied, and (3) ensure that the emission control devices are being properly operated and mainta ined on a continuous basis. This final NSR rule does not create ne w information collection requirements, but rather expands the coverage of the existi ng requirements of the major NSR program. Specifically, the rule changes fi nalized in this action add PM 2.5 to the list of air pollutants that must be addressed in the major NS R program, and the companion proposal adds certain elements that are necessary for a complete PM 2.5 NSR program. This change is unlikely to increase significantly the number of NSR permits that must be issued, but may add to the analyses that sources and Fede ral, State, and local reviewing authorities must conduct as part of the construction permit application and review process. We expect the rule changes finalized in this action to increase the burden associated with major NSR permitting for tracking new emissions of PM 2.5 against increments; collecting ambient air quality monitoring data for existing PM 2.5 concentrations; reviewing the effects of PM 2.5 emissions on soils a nd vegetation, as well as on air quality related values in Class I area s; determining the appropriate best available control technology or lowest achievable emission rate; and/or obtaining offsets. At the same time, there would be a reduction in burde n directly associated with the revocation of the annual increment for PM 10 , which is proposed in the proposed rule. Over the 3-year period covered by the I CR, we estimate an average annual burden increase of about 39,000 hours (about 8 percent) and $4.3 million (abou t 10 percent) for all industry entities that would be affected by this final NSR rule. For the same reasons, we also expect the final rule to increase burden for the State and local authorities reviewing permit applications when fully implemented. In addition, there would be 91additional burden for State and local agencies to revise their SIPs to incorporate the proposed changes. We estimate the combined increase in burden to average about 16,000 hours and $700,000 annually for all State and lo cal reviewing author ities, which is less than 13 percent. Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or di sclose or provide information to or for a Federal agency. This includes the time needed to review instru ctions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete a nd review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA’s regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is approved by OMB, the Agency will publish a technical amendment to 40 CFR part 9 in the Federal Register to display the OMB control number for the approved information collection requirem ents contained in this final rule.
C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) gene rally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Proce dure Act or any other statute unless the 92Agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this proposed rule on small entities, “small entity” is defined as: (1) a small business as defined by the Small Business Administration’s regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government or a cit y, county, town, school district or special district with a population of less than 50,000; and (3) a sma ll organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

. After considering the economic impacts of this final rule on small entities, I certify that this rule will not have a significant economic impact on a substantial number of small entities. The requireme nts of this final rule apply only to new major stationary sources or major modifications of existing majo r stationary sources. This final rule does not create any new requirements under the ma jor NSR program, but simply expands the program to cover an additional pollutant, referred to as PM 2.5 . There is no reason to expect that the rule will signi ficantly or uniquely affect sm all businesses, organizations, or governments (few, if any, of which act as re viewing authorities pursuant to this final rule).
D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Refo rm Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, we generally must prepare a written statement, including a 93cost-benefit analysis, for propos ed and final rules with “Federal mandates” that may result in expenditures to State, local, and tr ibal governments, in aggregate, or to the private sector, of $100 million or more in a ny 1 year. Before promulgating an EPA rule for which a written statement is needed, sect ion 205 of the UMRA generally requires us to identify and consider a r easonable number of regulator y alternatives and adopt the least costly, most cost-effective, or leas t burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows us to adopt an alternative other than the least-costly, most cost-effectiv e, or least-burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before we establish any regulator y requirements that may significantly or uniquely affect small governments, incl uding tribal governments, we must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affect ed small governments, enabling officials of affected small governments to have meaningf ul and timely input in the development of our regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small gove rnments on compliance with the regulatory requirements. We have determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more fo r State, local, and tribal governments, in the aggregate, or the private sector in any 1 year. The fi nal rule does not add any new requirements to the NSR program; it simply expands the program to cover PM 2.5 in addition to the several other pollutants alre ady defined as regulated NSR pollutants. 94(Technically, the rule also s ubjects the precursors to PM 2.5 to the NSR program. However, these precursors (SO 2 , NO X , and VOC) are already subject to the existing NSR program.) As discussed previously in section VI.B on the Paperwork Reduction Act , the expansion of the NSR program to cover PM 2.5 will only marginally increase the expenditures of State, local, and tribal governments and the private sector on the program. Thus, this action is not subject to the requirements of s ections 202 and 205 of the UMRA. The EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small gove rnments. As noted previously, this rule does not create any new requirements under th e major NSR program, but simply expands the program to cover an additional pollutant (PM 2.5 ). There is no reason to expect that the rule will significantly or uniquely affect small government s, few if any of which act as reviewing authorities.
E. Executive Order 13132 - Federalism Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires us to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federali sm implications” is defined in the Executive Order to include regulations that have “subs tantial direct effects on the States, on the relationship between the nati onal government and the States, or on the distribution of power and responsibilities among the various levels of government.” This final rule does not have federalism im plications. It will not have substantial direct effects on the States, on the relations hip between the national government and the 95States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. Pursuant to th e terms of Executive Order 13132, it has been determin ed that this proposed rule does not have “federalism implications” because it does not meet the neces sary criteria. Thus , the requirements of section 6 of the Executive Order do not apply to this proposed rule. In the spirit of Executive Order 13132, however, and consis tent with our policy to promote communications between us and State and local governments, we specifically solicited comment on the proposed rule from State and local officials.
F. Executive Order 13175 - Consultation a nd Coordination with Indian Tribal
Governments Executive Order 13175, entitled "Consultati on and Coordinati on with Indian Tribal Governments" (65 FR 67249, Novemb er 9, 2000), requires EPA to develop an accountable process to ensure "meaningful a nd timely input by Tribal officials in the development of regulatory policie s that have Tribal implicati ons." This final rule does not have "Tribal implications" as defined in Executive Order 13175. This rule concerns the NSR requirements for State and tribal implementation plans. The CAA provides for States to develop plans to re gulate emissions of air pollutant s within their jurisdictions. The Tribal Air Rule (TAR) under the CAA gi ves Tribes the opportunity to develop and implement CAA programs such as programs to attain and maintain the PM 2.5 NAAQS, but it leaves to the discretion of the Trib e the decision of whether to develop these programs and which programs, or appropriate elements of a program, they will adopt. Although Executive Order 13175 does not apply to this rule, EPA did reach out to Tribal leaders and environmental staff in developing this rule. From 2001 – 2004, the 96EPA supported a National Designations Wo rkgroup to provide a forum for tribal professionals to give input to the designa tions process. In 2006, EPA supported a national "Tribal Air call" which provides an ope n forum for all Tribes to voice concerns to EPA about the NAAQS implementation process, including the PM 2.5 NAAQS. In these meetings, EPA briefed call participants and Tribal environmental professionals gave input as the rule was under developm ent. Furthermore, in December 2005, EPA sent individualized letters to all federally recognized Tribes about the proposal to give Tribal leaders the opportun ity for consultation. This final rule does not have Tribal implications as defined by Executive Order 13175. It does not have a substantial direct effect on one or more Indian Tribes, since no Tribe has implemented a CAA program to attain the PM 2.5 NAAQS at this time. The EPA notes that even if a Tribe were implementi ng such a plan at this time, while the rule might have Tribal implications with respect to that Tribe, it woul d not impose substantial direct costs upon it, nor woul d it preempt Tribal law. Furthermore, this rule does not affect th e relationship or distribution of power and responsibilities between the Federal government and Indian Tribes. The CAA and the TAR establish the relationship of the Federal government and Tribes in developing plans to attain the NAAQS, and this ru le does nothing to modify that relationship. As this rule does not have Tribal implications, Executive Order 13175 does not apply.
G. Executive Order 13045 - Protection of Children from Environmental Health and Safety Risks Executive Order 13045, entitled “Protecti on of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), applies to any rule that: 97(1) is determined to be “economically si gnificant” as defined under Executive Order 12866; and (2) concerns an environmental health or safety risk that we have reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the en vironmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. This final rule is not subject to the Executive Order because it is not economically significant as defined in Executive Order 12866, and because the Agency does not have reason to believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. This rule does not impose any new requirements under the NSR program. However, in expanding the major NSR program to address
PM 2.5 , we believe that this rule will serve to reduce environmental health risks to all citizens, including children, because one of the basic requirements of the major NSR program is that new and modified major stati onary sources must not cause or contribute to air quality in vi olation of the NAAQS.
H. Executive Order 13211 - Actions That Significantly Affect Energy Supply, Distribution, or Use This rule is not a “significant energy action” as defined in Executive Order 13211, “Actions Concerning Regulations That Signi ficantly Affect Ener gy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The final rule does not add any new requirements to the major NSR program; it simply expands the program to cover
PM 2.5 in addition to the severa l other pollutants already defined as regulated NSR 98pollutants. Although the major NSR progr am may apply to energy supply and distribution companies that bui ld or significantly modify ma jor sources of regulated NSR pollutants, we believe that any increase in expenditures for obtaining NSR permits that may result from this rule will be marginal rather than significant.
I. National Technology Transfer and Advancement Act As noted in the proposed rule, section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Pub lic Law No. 104-113, 12(d) (15 U.S.C. 272 note) directs us to use voluntary consen sus standards (VCS) in our regulatory and procurement activities unless to do so would be inconsistent with applicable law or otherwise impractical. The VCS are technical standards (e.g., mate rials specifications, test methods, sampling procedures, and busin ess practices) develope d or adopted by one or more voluntary consensus bodies. The NTTAA directs us to provide Congress, through annual reports to OMB, with explan ations when we do not use available and applicable VCS. This final rule does not i nvolve technical standards. Therefore, we did not consider the use of any VCS.
J. Executive Order 12898 - Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal executive policy on environmental justice. It s main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressi ng, as appropriate, disproportionately high and adverse human health or environmenta l effects of its programs, policies, and 99activities on minorities and low-income populations in the United States. The EPA has determined that this final rule will not have disproportionately high and adverse human health or environmen tal effects on minority or low-income populations because it will have the effect of improving air quality. While it does not impose any new requirements under the major NSR program, we believe that this rule, in expanding the NSR program to address PM 2.5 , will serve to reduce adverse human health and environmental effects for all citizen s, including minorities and low-income populations.
K

. Congressional Review Act The Congressional Review Act, 5 U.S.C. 801 et seq ., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgati ng the rule must submit a rule report, which includes a copy of the rule, to each House of the Congr ess and to the Comptroller General of the United States. The EPA will s ubmit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prio r to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2). The rules affected by this action will be effective [INSERT DATE 60 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER]

. L. Petitions for Judicial Review Under section 307(b)(1 ) of the Act, petitions for j udicial review of this action must be filed in the United States Court of Appeals for the District of Columbia Circuit 100by [INSERT DATE 60 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER] . Filing a petition for reconsid eration by the Administrator of this final rule does not affect the finality of this rule for the purpos es of judicial review nor does it extend the time within which a pe tition for judicial review may be filed, and shall not postpone the effectiv eness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. See Act section 307(b)(2).
M. Determination Under Section 307(d) The PSD portions of this rulemaking, wh ich implements part C of title I of the Act, are subject to the procedural requireme nts in section 307(d) of the Act. See section 307(d)(1)(J). In addition, pursuant to secti on 307(d)(1)(V) of the Ac t, the Administrator determines that the NA NSR portions of th is action should also be subject to the provisions of section 307(d) to ensure consiste ncy. All of the procedural requirements of section 307(d), e.g., docketing, hearing, and co mment periods, have been complied with during the course of this rulemaking.
VII. Statutory Authority The statutory authority for this act ion is provided by sections 101, 110, 165, 169, 172, 173, 301, and 302 of the Act as amended (42 U.S.C. 7401, 7410, 7475, 7479, 7502, 7503, 7601, and 7602). This rulemaking is also s ubject to section 307(d) of the Act (42
U.S.C. 7407(d)).

101______________________________________

______________________________________ Page 102 of 117 - Final Rule for Implemen tation of the New Source Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM 2.5 ) List of Subjects 40 CFR Part 51 Environmental protection, Administrative practices and procedures, Air pollution control, Intergovernmental relations. 40 CFR Part 52 Environmental protection, Administrative practices and procedures, Air pollution control, Intergovernmental relations.

Dated:

-______________________________________ Stephen L. Johnson, Administrator.

102For the reasons stated in the preamble, ti tle 40, chapter I of the Code of Federal Regulations is amended as follows. PART 51 - [Amended]
1. The authority citation for part 51 continues to read as follows: Authority: 23 U.S.C. 101; 42 U.S.C. 7401 - 7671q. Subpart I - [Amended]
2. Section 51.165 is amended as follows:

a. By revising pa ragraph (a)(1)(x)(A); b. By removing the word “or” at the end of paragraph (a)(1)(xxxvii)(B);

c. By revising para graph (a)(1)(xxxvii)(C); d. By adding paragraph (a)(1)(xxxvii)(D);

e. By redesignating para graphs (a)(9)(i) through (iii) as paragraphs (a)(9)(ii) through (iv), respectively, and a dding new paragraph (a)(9)(i); f. By removing from newly redesignated paragraph (a)(9)(iii) the reference to “paragraph (a)(9)(i)” and adding in its place “paragraph (a)(9)(ii)”; and
g. By adding paragraph (a)(11). §51.165 Permit requirements. (a) * * * (1) * * * (x)(A) Significant means, in reference to a net emissions increase or the potential of a source to emit any of the following pollutants, a rate of emissions that would equal or

103exceed any of the following rates: Pollutant Emission Rate Carbon monoxide: 100 tons per year (tpy) Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Ozone: 40 tpy of volatile organi c compounds or nitrogen oxides Lead: 0.6 tpy
PM 10 : 15 tpy
PM 2.5 : 10 tpy of direct PM 2.5 emissions; 40 tpy of sulfur dioxide emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to be a PM 2.5 precursor under paragraph (a)(1)(xxxvii) of this section

* * * * * (xxxvii) * * * (C) Any pollutant that is identified under this paragraph (a)(1)(xxxvii)(C) as a constituent or precursor of a general pollutant listed unde r paragraph (a)(1)(xxxvii)(A) or (B) of this section, provided that such cons tituent or precursor pollutant may only be regulated under NSR as part of regulation of the general pollutant. Precursors identified by the Administrator for purposes of NSR are the following: ( 1 ) Volatile organic compounds and nitrogen oxides are pr ecursors to ozone in all ozone nonattainment areas. ( 2 ) Sulfur dioxide is a precursor to PM 2.5 in all PM 2.5 nonattainment areas. ( 3 ) Nitrogen oxides are presumed to be precursors to PM 2.5 in all PM 2.5 104nonattainment areas, unless the State demonstrat es to the Administrator’s satisfaction or EPA demonstrates that emissions of nitrogen oxides from sources in a specific area are not a significant contributo r to that area’s ambient PM 2.5 concentrations. ( 4 ) Volatile organic compounds and ammoni a are presumed not to be precursors
to PM 2.5 in any PM 2.5 nonattainment area, unless the State demonstrates to the Administrator’s satisfaction or EPA demonstr ates that emissions of volatile organic compounds or ammonia from sources in a spec ific area are a signifi cant contri butor to that area’s ambient PM 2.5 concentrations; or (D) PM 2.5 emissions and PM 10 emissions shall include gaseous emissions from a source or activity which condense to form par ticulate matter at ambient temperatures. On or after January 1, 2011 (or any earlier date established in the upcoming rulemaking codifying test methods), such condensable pa rticulate matter shall be accounted for in applicability determinations and in establishing emissions limitations for PM 2.5 and PM 10 in nonattainment major NSR permits. Comp liance with emissions limitations for PM 2.5 and PM 10 issued prior to this date shall not be based on condensable particulate matter unless required by the terms and conditions of the permit or the applicable implementation plan. Applicability determin ations made prior to this date without accounting for condensable particulate matter sha ll not be considered in violation of this section unless the applicable implementation plan required c ondensable particulate matter to be included.
* * * * * (9)(i) The plan shall require that in meeting the emissions offset requirements of paragraph (a)(3) of this sec tion, the ratio of total actual emissions reductions to the 105emissions increase shall be at least 1:1 unle ss an alternative ratio is provided for the applicable nonattainment area in paragraphs (a)(9)(ii) through (a)(9 )(iv) of this section.
* * * * * (11) The plan shall requir e that in meeting the emissi ons offset requirements of paragraph (a)(3) of this section, the emissi ons offsets obtained shall be for the same regulated NSR pollutant unless interprecursor offsetting is permitted for a particular pollutant as specified in this paragraph. The plan may allow the offset requirements in paragraph (a)(3) of this section for direct PM 2.5 emissions or emissions of precursors of
PM 2.5 to be satisfied by offse tting reductions in direct PM 2.5 emissions or emissions of any PM 2.5 precursor identified under paragraph (a)(1)(xxxvii)(C) of this section if such offsets comply with the interprecursor trad ing hierarchy and ratio established in the approved plan for a particular nonattainment area.
* * * * * 3. Section 51.166 is amended as follows:

a. By revising paragraphs (b)(23)(i) and (b)(49)(i); b. By removing the word “or” at the end of paragraph (b)(49)(iii);

c. By adding and reserv ing paragraph (b)(49)(v); d. By adding paragraph (b)(49)(vi); and

e. By revising paragraphs (i)(5)(ii) and (i)(5)(iii).

106§51.166 Prevention of significant de terioration of air quality.
* * * * * (b) * * * (23)(i) Significant means, in reference to a net em issions increase or the potential of a source to emit any of the following pollutants, a rate of emissions that would equal or exceed any of the following rates: Pollutant and Emissions Rate Carbon monoxide: 100 tons per year (tpy) Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Particulate matter: 25 tpy of partic ulate matter emissions. 15 tpy of PM 10 emissions.
PM 2.5 : 10 tpy of direct PM 2.5 emissions; 40 tpy of sulfur dioxide emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to be a PM 2.5 precursor under paragraph (b)(49) of this section Ozone: 40 tpy of volatile organi c compounds or nitrogen oxides Lead: 0.6 tpy Fluorides: 3 tpy Sulfuric acid mist: 7 tpy Hydrogen sulfide (H 2 S): 10 tpy Total reduced sulfur (including H 2 S): 10 tpy Reduced sulfur compounds (including H 2 S): 10 tpy Municipal waste combustor organics (measured as total tetra-through octa-chlorinated 107dibenzo-p-dioxins and dibenzofurans): 3.2 x 10 -6 megagrams per year (3.5 x 10 -6 tons per year). Municipal waste combustor metals (measured as particulate matter): 14 megagrams per year (15 tons per year) Municipal waste combustor acid gases (m easured as sulfur dioxide and hydrogen chloride): 36 megagrams per year (40 tons per year) Municipal solid waste landfill emissions (measured as nonmethane organic compounds): 45 megagrams per year (50 tons per year)
* * * * * (49) * * * (i) Any pollutant for which a national ambient air quality standard has been promulgated and any pollutant identified under this paragraph (b)(49 )(i) as a constituent or precursor to such pollutant . Precursors identified by the Administrator for purposes of NSR are the following: ( a ) Volatile organic compounds and nitrogen oxides are pr ecursors to ozone in all attainment and unclassifiable areas. ( b ) Sulfur dioxide is a precursor to PM 2.5 in all attainment and unclassifiable

areas. ( c ) Nitrogen oxides are presumed to be precursors to PM 2.5 in all attainment and unclassifiable areas, unless the State demonstrates to the Ad ministrator’s satisfaction or EPA demonstrates that emissions of nitrogen oxides from sources in a specific area are not a significant contributo r to that area’s ambient PM 2.5 concentrations. ( d ) Volatile organic compounds are pres umed not to be precursors to PM 2.5 in 108any attainment or unclassifiable area, unless th e State demonstrates to the Administrator’s satisfaction or EPA demonstr ates that emissions of vol atile organic compounds from sources in a specific area are a significan t contributor to that area’s ambient PM 2.5 concentrations.
* * * * * (v) [Reserved.] (vi) Particulate matter (PM) emissions, PM 2.5 emissions, and PM 10 emissions shall include gaseous emissions from a s ource or activity which condense to form particulate matter at ambient temperatures. On or after January 1, 2011 (or any earlier date established in the upcoming rulemaking codifying test methods), such condensable particulate matter shall be accounted for in applicability determinations and in establishing emissions limitations for PM, PM 2.5 and PM 10 in PSD permits. Compliance with emissions limitations for PM, PM 2.5 and PM 10 issued prior to this date shall not be based on condensable particular matter unless required by the terms and conditions of the permit or the applicable implementation plan. Applicability determinations made prior to this date without accounting for condensable pa rticular matter shall not be considered in violation of this section unle ss the applicable implementatio n plan required condensable particular matter to be included.
* * * * * (i) * * * (5) * * * (ii) The concentrations of the pollutant in the area that the source or modification would affect are less than the concentrations liste d in paragraph (i)(5)(i) of this section; or 109(iii) The pollutant is not listed in paragraph (i )(5)(i) of this section.
* * * * *
4. Appendix S to Part 51 is amended as follows:

a. By revising paragrap hs II.A.10(i) and II.A.31; b. By revising paragraph IV.A, Condition 3;

c. By redesignating paragraphs IV .G.1 through IV.G.3 as paragraphs IV.G.2 through IV.G.4, respectively, and adding new paragraph IV.G.1; d. By removing from newly redesignated paragraph IV.G.3 the reference to “paragraph IV.G.1” and adding in its place “paragraph IV.G.2”; and

e. By adding paragraph IV.G.5. Appendix S to Part 51—Emission Offset Interpretative Ruling
* * * * *
II. * * *
A. * * *
10. (i) Significant means, in reference to a net emissions increase or the potential of a source to emit any of the following pollutants, a rate of emissions that would equal or exceed any of the following rates: Pollutant and Emissions Rate Carbon monoxide: 100 tons per year (tpy) Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Ozone: 40 tpy of volatile organi c compounds or nitrogen oxides Lead: 0.6 tpy 110Particulate matter: 25 tpy of particulate matter emissions
PM 10 : 15 tpy
PM 2.5 : 10 tpy of direct PM 2.5 emissions; 40 tpy of sulfur dioxide emissions
* * * * *
31. Regulated NSR pollutant , for purposes of this Ruling, means the following: (i) Nitrogen oxides or a ny volatile organic compounds; (ii) Any pollutant for which a nationa l ambient air quality standard has been promulgated; (iii) Any pollutant that is identifi ed under this paragr aph II.A.31(iii) as a constituent or precursor of a general pollutant listed under pa ragraph II.A.31(i) or (ii) of this Ruling, provided that such constituent or precursor pollutant may only be regulated under NSR as part of regulation of the gene ral pollutant. Precursors identified by the Administrator for purposes of NSR are the following: ( a ) Volatile organic compounds and nitrogen oxides are pr ecursors to ozone in all ozone nonattainment areas. ( b ) Sulfur dioxide is a precursor to PM 2.5 in all PM 2.5 nonattainment areas; or (iv) Particulate matter (PM) emissions, PM 2.5 emissions and PM 10 emissions shall include gaseous emissions from a source or activity which condense to form particulate matter at ambient temperatures. On or after January 1, 2011 (or any earlier date established in the upcoming rulemaking codi fying test methods), such condensable particulate matter shall be accounted for in applicability determinations and in establishing emissions limitations for PM, PM 2.5 and PM 10 in permits issued under this ruling. Compliance with emissions limitations for PM, PM 2.5 and PM 10 issued prior to
111this date shall not be based on condensable particulate matter unle ss required by the terms and conditions of the permit or the appli cable implementation plan. Applicability determinations made prior to this date without accounting for condensable particulate matter shall not be considered in violati on of this section unl ess the applicable implementation plan required condensable particulate matter to be included.
* * * * *
IV. * * *
A. * * * Condition 3 . Emission reductions ( offsets ) from existing sources 5 in the area of the proposed source (whether or not under the same ownership) are required such that there will be reasonable progress toward attainment of the applicable NAAQS. 6 Except as provided in paragraph IV.G .5 of this Ruling (addressing PM 2.5 and its precursors), only intrapollutant emission offsets will be acceptable (e.g., hydrocarbon increases may not be offset against SO 2 reductions).

5 Subject to the provisions of paragraph IV.C of this Ruling.

6 The discussion in this pa ragraph is a proposal, but represents EPA’s interim policy until final rulemaking is completed.
* * * * *
G. Offset ratios

. 1. In meeting the emissions offset re quirements of paragraph IV.A, Condition 3 of this Ruling, the ratio of total actual emissions reductions to the emissions increase shall be at least 1:1 unless an alternat ive ratio is provided for the applicable nonattainment area in para graphs IV.G.2 through IV.G.4.
112* * * * * 5. Interpollutant offsetting . In meeting the emissions offset requirements of paragraph IV.A, Condition 3 of this Ruling, th e emissions offsets obtained shall be for the same regulated NSR pollutant unless interpollutant offsetting is permitted for a particular pollutant as specifi ed in this paragraph IV.G.5. The offset requirements of paragraph IV.A, Condition 3 of this Ruling for direct PM 2.5 emissions or emissions of precursors of PM 2.5 may be satisfied by offse tting reductions of direct PM 2.5 emissions or emissions of any PM 2.5 precursor identified under paragra ph II.A.31 (iii) of this Ruling if such offsets comply with an interprecursor trading hierarchy a nd ratio approved by the Administrator.
* * * * * PART 52 – [Amended] 5. The authority citation for part 52 continues to read as follows: Authority: 42 U.S.C. 7401 et seq

. Subpart A - [Amended]
6. Section 52.21 is amended as follows:

a. By revising paragraphs (b)(23)(i) and (b)(50)(i); b. By removing the word “or” at the end of paragraph (b)(50)(iii);

c. By adding and reserv ing paragraph (b)(50)(v); d. By adding paragraphs (b)(50)(vi) and (i)(1)(xi);

e. By revising paragraph (i)(5)(ii); and f. By adding paragraph (i)(5)(iii). §52.21 Prevention of significant deterioration of air quality. 113* * * * * (b) * * * (23)(i) Significant means, in reference to a net emissions increase or the potential of a source to emit any of the following pollutants, a rate of emissions that would equal or exceed any of the following rates: Pollutant and Emissions Rate Carbon monoxide: 100 tons per year (tpy) Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Particulate matter: 25 tpy of particulate matter emissions
PM 10 : 15 tpy
PM 2.5 : 10 tpy of direct PM 2.5 emissions; 40 tpy of sulfur dioxide emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to be a PM 2.5 precursor under paragraph (b)(50) of this section Ozone: 40 tpy of volatile organi c compounds or nitrogen oxides Lead: 0.6 tpy Fluorides: 3 tpy Sulfuric acid mist: 7 tpy Hydrogen sulfide (H 2 S): 10 tpy Total reduced sulfur (including H 2 S): 10 tpy Reduced sulfur compounds (including H 2 S): 10 tpy Municipal waste combustor organics (measured as total tetra-through octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 3.2 x 10 -6 megagrams per year (3.5 x 10 -6 tons 114per year) Municipal waste combustor metals (measured as particulate matter): 14 megagrams per year (15 tons per year) Municipal waste combustor acid gases (m easured as sulfur dioxide and hydrogen chloride): 36 megagrams per year (40 tons per year) Municipal solid waste landfills emissions (m easured as nonmethane organic compounds): 45 megagrams per year (50 tons per year)
* * * * * (50) * * * (i) Any pollutant for which a national ambient air quality standard has been promulgated and any pollutant identified under this paragraph (b)(50 )(i) as a constituent or precursor for such pollutant. Precursors identified by the Administrator for purposes of NSR are the following: ( a ) Volatile organic compounds and nitrogen oxides are pr ecursors to ozone in all attainment and unclassifiable areas. ( b ) Sulfur dioxide is a precursor to PM 2.5 in all attainment and unclassifiable

areas. ( c ) Nitrogen oxides are presumed to be precursors to PM 2.5 in all attainment and unclassifiable areas, unless the State demonstrates to the Ad ministrator’s satisfaction or EPA demonstrates that emissions of nitrogen oxides from sources in a specific area are not a significant contributo r to that area’s ambient PM 2.5 concentrations. ( d ) Volatile organic compounds are pr esumed not to be precursors to
PM 2.5 in any attainment or unclassifiable ar ea, unless the State demonstrates to the 115Administrator’s satisfaction or EPA demonstr ates that emissions of volatile organic compounds from sources in a specific area ar e a significant contribu tor to that area’s ambient PM 2.5 concentrations.

* * * * * (v) [Reserved.] (vi) Particulate matter (PM) emissions, PM 2.5 emissions and PM 10 emissions shall include gaseous emissions from a source or activity which condense to form particulate matter at ambient temperatures. On or after January 1, 2011 (or any earlier date established in the upcoming rulemaking codi fying test methods), such condensable particulate matter shall be accounted for in applicability determinations and in establishing emissions limitations for PM, PM 2.5 and PM 10 in PSD permits. Compliance with emissions limitations for PM, PM 2.5 and PM 10 issued prior to this date shall not be based on condensable particular matter unless required by the terms and conditions of the permit or the applicable implementation plan. Applicability determinations made prior to this date without accounting for condensable pa rticular matter shall not be considered in violation of this section unle ss the applicable implementatio n plan required condensable particular matter to be included.
* * * * * (i) * * * (1) * * * (xi) The source or modification was s ubject to 40 CFR 52.21, with respect to
PM 2.5 , as in effect before [INSERT DATE 60 DAYS FROM DATE OF 116PUBLICATION IN FEDERAL REGISTER], and the owner or operator submitted an application for a permit under this section before that date consistent with EPA recommendations to use PM 10 as a surrogate for PM 2.5 , and the Administrator subsequently determines that the applicati on as submitted was complete with respect to the PM 2.5 requirements then in effect, as interpreted in the EPA memorandum entitled “Interim Implementation of New Source Review Requirements for PM 2.5 ” (October 23, 1997). Instead, the requirements of paragra phs (j) through (r) of this section, as interpreted in the aforementioned memo randum, that were in effect before [INSERT DATE 60 DAYS FROM DATE OF PUBL ICATION IN FEDERAL REGISTER] shall apply to such source or modification.
* * * * * (5) * * * (ii) The concentrations of the pollutant in the area that the source or modification would affect are less than the concentrations liste d in paragraph (i)(5)(i) of this section; or (iii) The pollutant is not listed in paragraph (i )(5)(i) of this section.
* * * * *

117